Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________________________________________

FORM 10-K

_____________________________________________________________________________________________



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2017



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-33093

LIGAND PHARMACEUTICALS INCORPORATED

(Exact name of registrant as specified in its charter)



Delaware		77-0160744
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

3911 Sorrento Valley Boulevard, Suite 110 San Diego, CA		92121
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (858) 550-7500

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $.001 per share	The Nasdaq Global Market of The Nasdaq Stock Market LLC
Preferred Share Purchase Rights	The Nasdaq Global Market of The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large Accelerated Filer x	Accelerated Filer o	Non-accelerated Filer o	Smaller reporting company o	Emerging growth company o
	(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act). Yes o No x

The aggregate market value of the Registrant’s voting and non-voting stock held by non-affiliates was approximately $2.2 billion based on the last sales price of the Registrant’s Common Stock on the NASDAQ Global Market of the NASDAQ Stock Market LLC on June 30, 2017. For purposes of this calculation, shares of Common Stock held by directors, officers and 10% stockholders known to the Registrant have been deemed

to be owned by affiliates which should not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Registrant or that such person is controlled by or under common control with the Registrant.

As of February 26, 2018, the Registrant had 21,204,264 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant’s 2018 Annual Meeting of Stockholders to be filed with the Commission within 120 days of December 31, 2017 are incorporated by reference in Part III of this Annual Report on Form 10-K. With the exception of those portions that are specifically incorporated by reference in this Annual Report on Form 10-K, such Proxy Statement shall not be deemed filed as part of this Report or incorporated by reference herein.

Table of Contents



Part I
Item 1.	Business	1
Item 1A.	Risk Factors	22
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	31
Item 3.	Legal Proceedings	31
Item 4.	Mine Safety Disclosures	32

Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	32
Item 6.	Selected Consolidated Financial Data	34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 8.	Consolidated Financial Statements and Supplementary Data	44
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	78
Item 9A.	Controls and Procedures	78
Item 9B.	Other Information	78

Part III
Item 10.	Directors, Executive Officers and Corporate Governance	82
Item 11.	Executive Compensation	82
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	82
Item 13.	Certain Relationships and Related Transactions, and Director Independence	82
Item 14.	Principal Accountant Fees and Services	82

Part IV
Item 15.	Exhibits, Financial Statement Schedules	83
Item 16.	Form 10K - Summary	83
Signatures		88



GLOSSARY OF TERMS AND ABBREVIATIONS
Abbreviation	Definition
2019 Convertible Senior Notes	$245.0 million aggregate principal amount of convertible senior unsecured notes due 2019
ADHF	Acute decompensated heart failure
ESPP	Employee Stock Purchase Plan, as amended and restated
Amgen	Amgen, Inc.
AML	Acute myeloid leukemia
ANDA	Abbreviated New Drug Application
API	Active pharmaceutical ingredient
ASCT	Autologous Stem Cell Transplantation
ASU	Accounting Standards Update
Azure	Azure Biotech, Inc.
Baxter	Baxter International, Inc.
BMS	Bristol Myers Squibb
Cardioxyl	Cardioxyl Pharmaceuticals, Inc.
CFDA	China Food and Drug Administration
CIT	Chemotherapy-induced thrombocytopenia
Coherus Biosciences	Coherus Biosciences, Inc.
CoM	Composition of Matter
Company	Ligand Pharmaceuticals Incorporated, including subsidiaries
COSO	Committee of Sponsoring Organizations of the Treadway Commission
CRO	Contract Research Organization
Crystal	Crystal Bioscience, Inc.
CURx	CURx Pharmaceuticals, Inc.
CVR	Contingent value right
CyDex	CyDex Pharmaceuticals, Inc.
DMF	Drug Master File
Eli Lilly	Eli Lilly and Company
EPOR	Erythropoietin receptor
EU	European Union
FASB	Financial Accounting Standards Board
FDA	Food and Drug Administration
FSGS	Focal segmental glomerulosclerosis
GCSF	Granulocyte-colony stimulating factor
Hovione	Hovione FarmCiencia
IPR&D	In-Process Research and Development
IRAK4	Interleukin-1 Receptor Associated Kinase-4
ITP	Chronic immune (idiopathic) thrombocytopenic purpura
IV	Intravenous
Ligand	Ligand Pharmaceuticals Incorporated, including subsidiaries
LSA	Loan and Security Agreement
LTP	Liver-targeted prodrug
Lundbeck	Lundbeck A/S
MDS	Myelodysplastic syndromes
Melinta	Melinta Therapeutics, Inc.



Merck	Merck & Co., Inc.
Merrimack	Merrimack Pharmaceuticals, Inc.
MLA	Master License Agreement
MRSA	Methicillin-resistant Staphylococcus aureu
NASH	Non-alcoholic steatohepatitis
NDA	New Drug Application
NOLs	Net Operating Losses
Novartis	Novartis AG
OMT	Open Monoclonal Technology, Inc.
Omthera	Omthera Pharmaceuticals, Inc.
Orange Book	Publication identifying drug products approved by the FDA based on safety and effectiveness
Par	Par Pharmaceutical, Inc.
Pfizer	Pfizer Inc.
PPD	Post-Partum Depression
Retrophin	Retrophin Inc.
SAA	Severe Aplastic Anemia
SAGE	Sage Therapeutics, Inc.
SARM	Selective Androgen Receptor Modulator
Sedor	Sedor Pharmaceuticals, Inc., or RODES, Inc.
Selexis	Selexis, SA
Sermonix	Sermonix Pharmaceuticals, LLC
Spectrum	Spectrum Pharmaceuticals, Inc.
Takeda	Takeda Pharmaceuticals Company Limited
Tax Act	The Tax Cuts and Jobs Act
T2DM	Type 2 Diabetes Mellitis
TG Therapeutics	TG Therapeutics, Inc.
TPE	Third-party evidence
TR-Beta	Thyroid hormone receptor beta
VentiRx	VentiRx Pharmaceuticals Inc.
VIE	Variable interest entity
Viking	Viking Therapeutics
Vireo	Vireo Health
X-ALD	X-linked adrenoleukodystrophy
Zydus Cadila	Zydus Cadila Healthcare Ltd

PART I

Cautionary Note Regarding Forward-Looking Statements:

You should read the following together with the more detailed information regarding our company, our common stock and our financial statements and notes to those statements appearing elsewhere in this document.

This report contains forward-looking statements that involve a number of risks and uncertainties. Although our forward-looking statements reflect the good faith judgment of our management, these statements can only be based on facts and factors currently known by us. Consequently, these forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from results and outcomes discussed in the forward-looking statements.

Forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “plan,” “intends,” “estimates,” “would,” “continue,” “seeks,” “pro forma,” or “anticipates,” or other similar words (including their use in the negative), or by discussions of future matters such as those related to our future results of operations and financial position, royalties and milestones under license agreements, Capitsol material sales, product development, and product regulatory filings and approvals, and the timing thereof, as well as other statements that are not historical. You should be aware that the occurrence of any of the events discussed under the caption “Risk Factors” could negatively affect our results of operations and financial condition and the trading price of our stock.

The cautionary statements made in this report are intended to be applicable to all related forward-looking statements wherever they may appear in this report. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we assume no obligation to update our forward-looking statements, even if new information becomes available in the future. This caution is made under the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended.

References to “Ligand Pharmaceuticals Incorporated,” “Ligand,” the “Company,” “we,” “our” and “us” include Ligand Pharmaceuticals Incorporated and our wholly-owned subsidiaries.

Trademarks

Our trademarks, trade names and service marks referenced herein include Ligand^®, Captisol^®, Captisol-enabled^™, LTP technology^™, OmniAb^®, OmniMouse^®, OmniRat^®, OmniFlic^®and OmniChicken^TM. All other trademarks, trade names and service marks including Baxdela^TM, Carnexiv^TM, Conbriza^®, Duavee^®, Evomela^®,Kyprolis^®, Promacta^®, Revolade^®, SUREtechnology Platform^™, Viviant^®, Vivitra^®, Bryxta^®, and Exemptia^®are the property of their respective owners. Use or display by us of other parties’ trademarks, trade dress or products is not intended to and does not imply a relationship with, or endorsement or sponsorship of, us by the trademark or trade dress owners.



Item 1.	Business

Overview

We are a biopharmaceutical company focused on developing and acquiring technologies that help pharmaceutical companies discover and develop medicines. Over our more than 30 year history, we have employed research technologies such as nuclear receptor assays, high throughput computer screening, formulation science, liver targeted pro-drug technologies and antibody discovery technologies to assist companies in their work toward securing prescription drug approvals. We currently have partnerships and license agreements with over 95 pharmaceutical and biotechnology companies, and over 165 different programs under license with us are currently in various stages of commercialization and development. We have contributed novel research and technologies for approved medicines that treat cancer, osteoporosis, fungal infections and low blood platelets, among others. Our partners have programs currently in clinical development targeting seizure, coma, cancer, diabetes, cardiovascular disease, muscle wasting, liver disease, and kidney disease, among others. We have over 800 issued patents worldwide.

We have assembled our large portfolio of fully-funded programs either by licensing our own proprietary drug development programs, licensing our platform technologies such as Captisol or OmniAb to partners for use with their proprietary programs, or acquiring existing partnered programs from other companies. Fully-funded programs are those for which our partners pay all of the development and commercialization costs. For our internal programs, we generally plan to advance drug candidates through early-stage drug development or clinical proof-of-concept.

Our business model creates value for stockholders by providing a diversified portfolio of biotech and pharmaceutical product revenue streams that are supported by an efficient and low corporate cost structure. Our goal is to offer investors an opportunity to participate in the promise of the biotech industry in a profitable, diversified and lower-risk business than a typical biotech company. Our business model is based on doing what we do best: drug discovery, early-stage drug development, product reformulation and partnering. We partner with other pharmaceutical companies to leverage what they do best (late-stage development, regulatory management and commercialization) to ultimately generate our revenue. We believe that focusing on discovery and early-stage drug development while benefiting from our partners’ development and commercialization expertise will reduce our internal expenses and allow us to have a larger number of drug candidates progress to later stages of drug development.

Our revenue consists of three primary elements: royalties from commercialized products, license and milestone payments and sale of Captisol material. In addition to discovering and developing our own proprietary drugs, we selectively pursue acquisitions to bring in new assets, pipelines, and technologies to aid in generating additional potential new revenue streams.

2017 and Recent Major Business Highlights

Major Acquisitions

•

In October 2017, Ligand acquired Crystal Bioscience and its OmniChicken antibody discovery technology for $25 million in cash at closing, up to $10.5 million of success-based milestones and revenue sharing from existing licensees for a defined period. The acquisition initially added four Shots on Goal to Ligand’s portfolio, and the OmniChicken technology, with the potential be utilized by multiple current OmniAb partners as they seek to develop antibodies for difficult-to-address targets.

Selected Late-Stage Clinical Developments


•	Sage Therapeutics announced positive top-line results from two Phase 3 trials of brexanolone in severe PPD and in moderate PPD. Sage plans to file an NDA with the FDA in 2018.


•	Viking Therapeutics announced positive results from a 12-week, Phase 2 clinical trial of VK5211 in patients who recently suffered a hip fracture. Top-line data demonstrated statistically significant, dose-dependent increases in lean body mass ranging from 4.8% to 9.1% following treatment with VK5211. Viking intends to present additional results from the study at an upcoming scientific conference.


•	Retrophin presented new data from the open-label extension portion of the Phase 2 DUET study of sparsentan for the treatment of FSGS at the American Society of Nephrology Kidney Week 2017. Retrophin also announced that it is

conducting feasibility analyses and engaging regulatory agencies with the expectation of initiating a clinical trial for sparsentan in IgA nephropathy (IgAN), an immune-complex mediated glomerulonephritis, in 2018.


•	Merrimack announced that it had enrolled the last patient in the ongoing CARRIE study, a Phase 2, double-blind, placebo-controlled, randomized trial evaluating MM-141 (istiratumab) in combination with standard of care in previously untreated patients with metastatic pancreatic cancer.


•	Marinus Pharmaceuticals announced that it had initiated a Phase 2 double-blind, placebo-controlled clinical trial to evaluate the safety, efficacy and pharmacokinetics of ganaxolone IV in women diagnosed with severe postpartum depression.


•	Exelixis announced that Daiichi Sankyo reported positive top-line results from a Phase 3 pivotal trial of esaxerenone in patients with essential hypertension in Japan and that a Japanese regulatory application is expected to be submitted in 2018.


•	Takeda Pharmaceuticals announced the Phase 3 initiation of pevonedistat plus Azacitidine versus single-agent azacitidine as first-line treatment for patients with higher-risk myelodysplastic syndromes, chronic myelomonocytic leukemia, or low-blast acute myelogenous leukemia.


•	Aldeyra announced the following for reproxalap (ADX-102):


◦	The last patient had completed dosing in their multicenter, double-blind, randomized Phase 2b clinical trial of reproxalap (ADX-102) in allergic conjunctivitis;


◦	Enrollment of the first patient in a Phase 2b clinical trial of topical ocular reproxalap for the treatment of dry eye disease;


◦	Presentation of data from its Phase 2 clinical trial of reproxalap in noninfectious anterior uveitis at the American Uveitis Society Fall Meeting.


•	Opthea announced the dosing of the first patient in the Phase 2b trial of OPT-302 for wet age-related macular degeneration (AMD) and the commencement a Phase 1b/2a trial evaluating the safety and efficacy of OPT-302 in patients with center-involved diabetic macular edema.


•	Merck announced it stopped the Phase 2/3 EPOCH and Phase 3 APECS studies evaluating verubecestat in people with mild-to-moderate and prodromal Alzheimer’s disease due to the conclusion that the efficacy endpoint could not be achieved.

Selected Regulatory Developments

•

Melinta Therapeutics announced that the FDA approved both IV and oral Baxdela™ (delafloxacin) for the treatment of adults with acute bacterial skin and skin structure infections (ABSSSI) caused by susceptible bacteria. As a result of the approval, Ligand earned a $1.5 million milestone payment and will earn a 2.5% royalty on Baxdela IV sales. Following approval, Melinta Therapeutics entered into a $90 million loan and securities financing agreement with Oberland Capital Management, LLC to fund commercialization activities and indication expansion of Baxdela.


•	CASI Pharmaceuticals announced that China’s Food and Drug Administration granted priority review for CASI’s import drug registration clinical trial application for EVOMELA.


•	Zydus Cadila announced that it received approval to market its bevacizumab biosimilar in India and subsequently launched the drug, which is marketed as Bryxta.


•	CStone Pharmaceuticals announced that it received Clinical Trial Application approval from the China Food and Drug Administration to conduct clinical trials in China with CS1001, an OmniAb-derived full-length anti-PDL1 monoclonal antibody.

•

Janssen filed an IND application for an antibody discovered using Ligand’s OmniAb technology. The IND filing resulted in a $1 million milestone payment to Ligand. Janssen has a royalty-free license to the OmniAb technology (entered into with OMT in October of 2013), but will potentially pay Ligand further development and commercial milestones upon clinical success and regulatory approval of any therapeutic developed using the OmniAb technology.


•	Novartis announced that Promacta received Breakthrough Therapy designation for first-line use in SAA from the FDA.


•	Amgen announced at ASH in December and published in the Journal of Clinical Oncology in January the positive overall survival results of the Kyprolis ASPIRE trial. Amgen has submitted the data to the FDA for inclusion in the label.


•	Amgen announced that the overall survival data from the ENDEAVOR trial was added to the Kyprolis label.

Disclosed Licensing Deals Entered into or Expanded

OmniAb Technology


•	Worldwide license agreements with Surface Oncology, xCella Biosciences, Ferring Pharmaceuticals and Glenmark Pharmaceuticals to use the OmniAb platform technologies to discover fully human antibodies. Ligand is eligible to

receive annual access payments, milestone payments and royalties on future net sales of any antibodies discovered under these licenses.

•

Worldwide platform license agreement with bluebird bio, Inc. Under the license, bluebird will be able to use the OmniRat®, OmniMouse® and OmniFlic® platforms to discover fully human mono- and bispecific antibodies and antibody fragments. Ligand is eligible to receive annual platform access payments, development milestone payments and royalties for each product incorporating an OmniAb antibody. Ligand previously disclosed rights to a single-antibody partnership had been licensed to bluebird, but this new agreement gives bluebird full access to the OmniAb platform.


•	Receipt of a $2 million payment from WuXi Biologics subsequent to their licensing of exclusive rights to the anti-PD-1 antibody GLS-010 to Arcus Biosciences in North America, Europe, Japan and certain other territories. Ligand is also entitled to future milestones and royalties from this antibody.

Captisol Technology


•	Commercial license and supply agreement with Amgen granting rights to use Captisol in the formulation of AMG 330, an anti-CD33 x anti-CD3 (BiTE®) bispecific antibody construct. Ligand is eligible to receive milestone payments, royalties and revenue from Captisol material sales related to AMG 330.


•	Commercial license and supply agreement with Marinus Pharmaceuticals granting rights to use Captisol in the formulation of IV ganaxolone. Ligand is entitled to milestone payments, royalties and revenue from Captisol material sales related to IV ganaxolone.


•	Commercial license and supply agreement with Interventional AnalgesiX granting rights to use Captisol in the formulation of an undisclosed compound. Ligand is eligible to receive milestone payments, tiered royalties of 5%-10% and revenue from Captisol material sales.


•	Commercial license and supply agreements with both Par Pharmaceuticals and Meridian Labs granting each rights to use Captisol in the formulation of separate undisclosed compounds.


•	Captisol Clinical Use Agreements with Eisai, Syros Pharmaceuticals and Vaxxas Inc.

New Chemical Entities

•

Expansion of Ligand’s license with Sermonix Pharmaceuticals to include worldwide rights to develop and commercialize oral lasofoxifene. Ligand originally licensed U.S. rights to oral lasofoxifene to Sermonix in February of 2015, and expanded the agreement to include the rest of the world. Ligand is entitled to commercial milestones and royalties on net sales ranging from 6-10% upon commercialization of oral lasofoxifene.

Internal Pipeline Highlights

•

Ligand announced positive top-line results from its Phase 2 clinical study evaluating the efficacy and safety of LGD-6972, as an adjunct to diet and exercise, in subjects with T2DM inadequately controlled on metformin monotherapy. The study achieved statistical significance (p < 0.0001) in the primary endpoint of change from baseline in hemoglobin A1c (HbA1c) after 12 weeks of treatment at all doses tested, demonstrating a robust, dose-dependent reduction in HbA1c of 0.90%, 0.92% and 1.20% with 5 mg, 10 mg and 15 mg of LGD-6972, respectively, compared to a 0.15% reduction with placebo. LGD-6972 was safe and well tolerated, with no drug-related serious adverse events and no dose-dependent changes in lipids (including total cholesterol, LDL cholesterol, HDL cholesterol and triglycerides), body weight or blood pressure after 12 weeks of treatment.

•

Ligand announced initiation of an internally-funded program to develop contrast agents with reduced renal toxicity for diagnostic imaging procedures through proof-of-concept, followed by sale or out-license for further development and commercialization. This development program will leverage Ligand’s Captisol technology, as well as intellectual property obtained through its acquisition of Verrow Pharmaceuticals for $2 million in cash plus earn outs.

Technologies

A variety of technology platforms that enable elements of drug discovery or development form the basis of our portfolio of fully-funded Shots on Goal. Platform technologies or individual drugs discovered by Ligand are related to a broad estate of intellectual property that includes over 800 issued patents.

OmniAb Technologies

Our OmniAb technology includes our OmniRat, OmniMouse, OmniFlic and OmniChicken technology platforms for use in discovering fully human antibodies. These platforms consist of genetically-engineered transgenic rodents that produce a broadly diversified repertoire of antibodies and enable novel fully-human antibody drug discovery and development by our OmniAb partners. Fully-human OmniAb antibodies provide advantages to our partners in that fully-human antibodies have reduced immunogenicity, streamline development timelines and costs, and accelerate novel antibody discovery. The OmniChicken platform consists of genetically-engineered transgenic chickens which enable the generation of novel antibodies against targets that are not immunogenic in mammals like mice and rats, the core species of Ligand’s existing OmniAb platform. Currently, more than 30 partners are utilizing OmniAb animals in their drug discovery and development efforts. incoLigand acquired these technologies through the acquisition of OMT in January 2016 and Crystal in October 2017

Captisol Technology

Captisol is Ligand’s patented, uniquely-modified cyclodextrin that is specifically designed to maximize safety, while improving the solubility, stability and bioavailability of APIs. Captisol can enable faster and more efficient development paths for our partners, given its known regulatory acceptance. Ligand maintains both Type IV and Type V DMFs with the FDA. These DMFs contain manufacturing and safety information relating to Captisol that our licensees can reference when developing Captisol-enabled drugs. Ligand also filed a DMF in Japan in 2015. Captisol-enabled drugs are marketed in more than 60 countries, and over 45 partners have Captisol-enabled drugs in development.

LTP Technology Platform

The LTP Technology platform is a novel prodrug technology designed to selectively deliver a broad range of pharmaceutical agents to the liver. A prodrug is a biologically inactive compound that can be metabolized in the body to produce an active drug. The LTP Technology works by chemically modifying biologically active molecules into an inactive prodrug, which will be administered to a patient and later activated by specific enzymes in the liver. The technology can be used to improve the safety and/or activity of existing drugs, develop new agents to treat certain liver-related diseases, and treat diseases caused by imbalances of circulating molecules that are controlled by the liver. The technology is especially applicable to metabolic and cardiovascular indications, among others. Currently 3 partners are utilizing the LTP Technology or related platform(s).

SUREtechnology Platform (owned by Selexis)

Ligand acquired economic rights to over 30 SUREtechnology Platform programs from Selexis in two separate transactions in 2013 and 2015, granting Ligand rights to downstream economics on novel biologics and biosimilars programs. The SUREtechnology Platform, developed and owned by Selexis, is a novel technology that improves the way that cells are utilized in the development and manufacturing of recombinant proteins and drugs. The technology is based on novel DNA-based elements that control the dynamic organization of chromatin within mammalian cells and allow for higher and more stable expression of recombinant proteins. The technology creates advantages over traditional approaches including accelerated development and manufacturing times, high yields and increased compound stability.

Partners and Licensees

The following table lists our disclosed partners and licensees.



Big Pharma	Ticker	Generics	Ticker	Biotech, continued	Ticker
Baxter	BAX	Alvogen	Private	Gilead Sciences	GILD
BMS	BMY	Avion	Private	Hanall	9420
Boehringer Ingelheim	Private	Beloteca	Private	Harbour	Private
Daiichi Sankyo	DSKY	BioCad	Private	Interventional Analgesix	Private
Eli Lilly	LLY	Coherus	CHRS	J-Pharma	Private
GSK	GSK	Gedeon Richter	GEDSF	Marinus	MRNS
Janssen	JNJ	IBC Generium	Private	MEI	MEIP
Merck	MRK	Oncobiologics	ONS	Melinta	MLNT
Merck KGaA	MRK.DE	Par Pharmaceuticals	PRX	Meridian Labs	Private
Novartis	NVS	Zydus Cadila	CADILAHC	Millennium	4502
Otsuka	4768			Merrimack	MACK
Pfizer	PFE	Biotech	Ticker	Nucorion	Private
Takeda	4502	ABBA	Private	Opthea	OPT
Teva	TEVA	Abbvie	ABBV	Precision Biologics	Private
		Achaogen	AKAO	Retrophin	RTRX
Specialty Pharma	Ticker	AiCuris	Private	Roivant	Private
Aziyo	Private	Aldeyra	ALDX	SAGE	SAGE
CorMatrix	Private	Alexo	Private	Seattle Genetics	SGEN
Cuda	Private	Amgen	AMGN	Seelos	Private
Eisai	4523	Arcus	Private	Surface Oncology	Private
Glenmark	GLENMARK	ARMO	ARMO	Symphogen	Private
Gloria	002437	Azure	Private	Syros	SYRS
Hikma	HIK	bluebird bio	BLUE	Teneobio	Private
Lundbeck	LUN	Celgene	CELG	Tetragenics	Private
Ono	4528	Chiva	Private	TG Therapeutics	TGTX
Sedor	Private	CSL	CSL	Tizona	Private
Sermonix	Private	C-Stone	Private	Vaxxas	Private
Shire	SHPG	CURx	Private	VentiRx	Private
Spectrum	SPPI	Aptevo	APVO	Vertex	VRTX
Vireo Health	Private	Exelixis	EXEL	Viking	VKTX
Upsher-Smith	Private	Ferring	Private	xCella	Private
		Five Prime	FRPX	XTL Bio	XTLB
		ForSight Vision	Private	WuXi	2269
		F-Star	Private
		Genmab	GEN
		Genekey Biotech	Private

Portfolio

We have a large portfolio of current and future potential revenue-generating programs, over 165 of which are fully-funded by our partners. In addition to the table below, we also have more than 48 undisclosed programs.



Approved

Blood Disorders		Cardiovascular		CNS
Blood Disorders		Cardiovascular		CNS
Novartis	Promacta	Baxter	Nexterone	Lundbeck	Carnexiv

Cancer				Medical Device/Cardiology
Cancer				Medical Device/Cardiology
Amgen	Kyprolis	Zydus Cadila	Vivitra	Aziyo Base Business	Aziyo
Spectrum	Evomela	Zydus Cadila	Bryxta	Cangaroo Envelope	Aziyo

Infectious Disease				Inflammatory/Metabolic
Infectious Disease				Inflammatory/Metabolic
Alvogen	Voriconazole	Melinta	Baxdela	Pfizer	Viviant/Conbriza
Hikma	Voriconazole	Par Pharmaceuticals	Posaconazole	Pfizer	Duavee
Merck	Noxafil-IV	Pfizer	Vfend-IV	Zydus Cadila	Exemptia

Phase 3 or Regulatory Submission Stage

Blood Disorders		Cardiovascular		Inflammatory/Metabolic
Blood Disorders		Cardiovascular		Inflammatory/Metabolic
Biocad	BCD-066	Exelixis/Daiichi-Sankyo	CS-3150	Coherus	CHS-0214

Cancer				CNS
Cancer				CNS
Oncobiologics	ONS-3010	Takeda	Pevonedistat	SAGE	Brexanolone
Oncobiologics	ONS-1045	Takeda	Pevonedistat	Sedor	CE-Fosphenytoin

Phase 2

Blood Disorders		Infectious Disease		Inflammatory/Metabolic
Blood Disorders		Infectious Disease		Inflammatory/Metabolic
Novartis	KLM465	Gilead	GS-5734	Coherus	CHS-0214

Cancer
Cancer
VentiRx Pharma	VTX-2337	Merrimack Pharma	MM-121	Novartis	Lubricin
Eli Lilly	Merestinib	Merrimack Pharma	MM-121	Novartis	Lubricin
Eli Lilly	Prexasertib	Merrimack Pharma	MM-141	Precision Biologics	Ensituximab

Cardiovascular		Other / Undisclosed		CNS
Cardiovascular		Other / Undisclosed		CNS
Cardioxyl / BMS	CXL-1427	Aldeyra Therapeutics	Reproxalab	Marinus Pharma	Ganaxalone IV
Retrophin	Sparsentan	Opthea Ltd	OPT-302	Seelos	Aplindore
XTL Bio	hCDR1	Opthea Ltd	OPT-302	Seelos	Aplindore



Phase 1

Cancer
Cancer
Amgen	AMG-330	Gloria	PD-1	Meridian	ML-061
Chiva Pharma	MB07133	IBC Generium	Deplera	Novartis	Mekinist POS
C-Stone	PDL-1	J-Pharma	JPH-203 (Injection)	Upsher-Smith	CXCR4
F-Star	F-102	Janssen	BCMAxCD3	VentiRx Pharma	VTX-1463
Gedeon Richter	Trastuzumab	MEI Pharma	ME-344	VentiRx Pharma	VTX-1463

Infectious Disease		Cardiovascular		CNS
Infectious Disease		Cardiovascular		CNS
Chiva Pharma	Pradefovir	IBC Generium	GNR-008	Cuda Pharma	Cudafol
Chiva Pharma	Pradefovir	Otsuka	OPC-108459	CURx Pharma	IV Topiramate

Inflammatory/Metabolic				Blood Disorders
Inflammatory/Metabolic				Blood Disorders
Gedeon Richter	RGB-03	Hanall	anti-FcRN	Novartis	KLM465
Genekey Biotech	PCSK-9	Takeda	TAK-020	Novartis	KLM465



Pre-Clinical

Other / Undisclosed
Other / Undisclosed
ABBA	OmniAb	Ferring	OmniAb	Pfizer	OmniAb
AbbVie	OmniAb	Five Prime Therapeutics	OmniAb	Seattle Genetics	OmniAb
Achaogen	OmniAb	F-Star	OmniAb	Surface Oncology	OmniAb
Alexo	OmniAb	Genmab	OmniAb	Symphogen	OmniAb
Amgen	OmniAb	Gilead	OmniAb	Teneobio	OmniAb
Aptevo	OmniAb	Glenmark	OmniAb	Tetragenics	OmniAb
ARMO Biosciences	OmniAb	Hanall Biopharma	OmniAb	Teva	OmniAb
Avion	CE programs	Interventional Analgesix	CE-program	Tizona	OmniAb
Bluebird	OmniAb	Janssen	OmniAb	WuXi	OmniAb
Boehringer Ingelheim	OmniAb	Merck KGaA	OmniAb	xCella	OmniAb
Celgene	OmniAb	Ono Pharmaceuticals	OmniAb	xCella	OmniAb

Inflammatory/Metabolic
Inflammatory/Metabolic
Azure	Lasofoxifene	Roivant	anti-FcRN	Seelos	H3 Receptor Antagonist
Harbour	anti-FcRN	Sedor	CE-Budesonide	Viking	DGAT-1 Inhibitor
Omthera/AstraZeneca	LTP-O3FA	Seelos	CRTH2 Antagonist	Vireo Health	CE-Cannabinoids

Infectious Disease		CNS
Infectious Disease		CNS
AiCuris GmBH	Undisclosed	Beloteca	CE-Ziprasodone	SAGE	SAGE-689
Nucorion	NUC-101	CURx Pharma	IV Lamotrigine	Seelos	CE-Acetaminophen
Nucorion	NUC-202	CURx Pharma	IV Lamotrigine	Seelos	CE-Acetaminophen

Cancer		Blood Disorders
Cancer		Blood Disorders
Arcus	PD-1	Viking	EPOR Agonist

Selected Commercial Programs

We have multiple programs under license with other companies that have products that are already being commercialized. The following programs represent components of our current portfolio of revenue-generating assets and potential for near-term growth in royalty and other revenue. For information about the royalties owed to Ligand for these programs, see “Royalties” later in this business section.

Promacta (Novartis)

We are party to a license agreement with Novartis related to Promacta, which is an oral medicine that increases the number of platelets in the blood. Platelets are one of the three components of blood and facilitate clotting in the blood. Individuals with low platelets can be at significant risk of bleeding or death. Because of the importance of having a sufficient number of platelets, Promacta has broad potential applicability to a number of medical situations where low platelets exist.

Promacta is currently approved for three indications: (1) the treatment of thrombocytopenia in adult and pediatric patients 1 year and older with ITP who have had an insufficient response to corticosteroids, immunoglobulins or splenectomy; (2) thrombocytopenia in patients with chronic hepatitis C to allow the initiation and maintenance of interferon-based therapy; and (3) patients with SAA who have had an insufficient response to immunosuppressive therapy. Promacta was initially approved in 2008, and the product has been generating royalty revenue for Ligand since 2009. Promacta is known as Revolade in the EU and other non-US markets.

Novartis has been and continues to pursue globalization of the brand and currently markets Promacta in multiple countries for the three approved indications. Specifically, ITP is currently approved in more than 100 countries, the Hepatitis C-related indication is currently approved in more than 50 countries, and the SAA indication is approved in more than 45 counties.

Beyond the currently-approved indications, Novartis is also performing or supporting development activities to expand the brand into new indications, including first-line use in SAA and oncology-related indications. As of February 2018, there are 24 open clinical trials related to Promacta (listed as recruiting or open, and not yet recruiting) on the clinicaltrials.gov website.

We are entitled to receive royalties related to Promacta during the life of the relevant patents or following patent expiry, at a reduced rate for ten years from the first commercial sale, whichever is longer, on a country-by-country basis. Novartis has listed a patent in the FDA’s, Orange Book for Promacta with an expiration date in 2029, and absent early termination for bankruptcy or material breach, the term of the agreement expires upon expiration of the obligation to pay royalties. There are no remaining milestones to be paid under the agreement.

Kyprolis (Amgen)

Ligand supplies Captisol to Amgen for use with carfilzomib, and granted Amgen an exclusive product-specific license under our patent rights with respect to Captisol. Kyprolis is formulated with Ligand’s Captisol technology and is approved in the U.S. for the following:


•	In combination with dexamethasone or with lenalidomide plus dexamethasone for the treatment of patients with relapsed or refractory multiple myeloma who have received one to three lines of therapy.


•	As a single agent for the treatment of patients with relapsed or refractory multiple myeloma who have received one or more lines of therapy.

Kyprolis is also approved in multiple countries outside the U.S. and Amgen continues to invest significantly in Kyprolis to further expand its label and geography. Amgen’s obligation to pay royalties does not expire until four years after the expiration of the last-to-expire patent covering Captisol. Our patents and applications relating to the Captisol component of Kyprolis are not expected to expire until 2033. Our agreement with Amgen may be terminated by either party in the event of material breach or bankruptcy, or unilaterally by Amgen with prior written notice, subject to certain surviving obligations. Absent early termination, the agreement will terminate upon expiration of the obligation to pay royalties. Under this agreement, we are entitled to receive remaining milestones of up to $2 million, revenue from clinical and commercial Captisol material sales and royalties on annual net sales of Kyprolis.

Evomela (Spectrum)

Ligand supplies Captisol to Spectrum for use with Evomela, which is a Captisol-enabled melphalan IV formulation. The FDA approved Evomela for use in two indications:


•	A high-dose conditioning treatment prior to ASCT in patients with multiple myeloma


•	For the palliative treatment of patients with multiple myeloma for whom oral therapy is not appropriate

Evomela has been granted Orphan Designation by the FDA for use as a high-dose conditioning regimen for patients with multiple myeloma undergoing ASCT. The Evomela formulation avoids the use of propylene glycol, which has been reported to cause renal and cardiac side-effects that limit the ability to deliver higher quantities of therapeutic compounds. The use of the Captisol technology to reformulate melphalan is anticipated to allow for longer administration durations and slower infusion rates, potentially enabling clinicians to safely achieve a higher dose intensity of pre-transplant chemotherapy.

Under the terms of the license agreement, we granted an exclusive license to Spectrum under our patent rights to Captisol relating to the product. We are eligible to receive over $50 million in potential milestone payments under this agreement and royalties on future net sales of the Captisol-enabled melphalan product. Spectrum’s obligation to pay royalties will expire at the end of the life of the relevant patents or when a competing product is launched, whichever is earlier, but in no event within ten years of the commercial launch. Our patents and applications relating to the Captisol component of melphalan are not expected to expire until 2033. Absent early termination, the agreement will terminate upon expiration of the obligation to pay royalties. The agreement may be terminated by either party for an uncured material breach or unilaterally by Spectrum by prior written notice.

Baxdela (Melinta)

Melinta’s Baxdela is a Captisol-enabled delafloxacin-IV that was approved by the FDA in June 2017 for the treatment of acute bacterial skin and skin structure infections. Delafloxacin is a novel hospital-focused fluoroquinolone antibiotic candidate with potency against a variety of disease-causing bacteria-gram-positives, gram-negatives, atypicals and anaerobes, including quinolone-resistant MRSA. Under the terms of the agreement, we may be entitled to regulatory milestones, as well as a royalty on potential future sales by Melinta, and revenue from Captisol material sales.

Nexterone (Baxter)

We have a license agreement with Baxter, related to Baxter's Nexterone, a Captisol-enabled formulation of amiodarone, which is marketed in the United States and Canada. We supply Captisol to Baxter for use in accordance with the terms of the license agreement under a separate supply agreement. Under the terms of the license agreement we will continue to earn milestone payments, royalties, and revenue from Captisol material sales. We are entitled to earn royalties on sales of Nexterone through early 2033.

Noxafil-IV (Merck)

We have a supply agreement with Merck related to Merck’s NOXAFIL-IV, a Captisol-enabled formulation of posaconazole for IV use. NOXAFIL-IV is marketed in the United States, EU and Canada. We receive our commercial compensation for this program through the sale of Captisol, and we do not receive a royalty on this program.

Carnexiv (Lundbeck)

Lundbeck's Carnexiv is a Captisol-enabled carbamazepine-IV that was approved by the FDA in October 2016. Carnexiv is indicated as replacement therapy for oral carbamazepine formulations, when oral administration is temporarily no feasible, in adults with certain seizure types. Under the terms of our agreement with Lundbeck, we may be entitled to development and regulatory milestones, royalties on potential future sales by Lundbeck and revenue from Captisol material sales. Lundbeck is responsible for all development costs related to the program.

Duavee or Duavive (bazedoxifene/conjugated estrogens) and Viviant/Conbriza (Pfizer)

Pfizer is marketing bazedoxifene under the brand names Viviantand Conbriza in various territories for the treatment of postmenopausal osteoporosis. Pfizer is responsible for the registration and worldwide marketing of bazedoxifene, a synthetic drug specifically designed to reduce the risk of osteoporotic fractures while also protecting uterine tissue. Pfizer has combined bazedoxifene with the active ingredient in Premarin to create a combination therapy for the treatment of post-menopausal symptoms in women. Pfizer is marketing the combination treatment under the brand names Duavee and Duavive in various territories. Net royalties on annual net sales of Viviant/Conbriza and Duavee/Duavive are each payable to us through the life of the relevant patents or ten years from the first commercial sale, whichever is longer, on a country by country basis.

Aziyo Portfolio (Aziyo)

Ligand receives a share of revenue from the currently marketed Aziyo portfolio of commercial pericardial repair and CanGaroo® Envelope extracellular matrix (ECM) products. In addition, Ligand has the potential to receive a share of revenue and potential milestones from the currently marketed CanGaroo® ECM Envelope for cardiac implantable electronic devices. Aziyo’s products are medical devices that are designed to permit the development and regrowth of human tissue.

Exemptia (Zydus Cadila)

Zydus Cadila’s Exemptia (adalimumab biosimilar) is marketed in India for autoimmune diseases. Zydus Cadila uses the Selexis technology platform for Exemptia. We are entitled to earn royalties on sales by Zydus Cadila for ten years following the first commercial sale.

Vivitra (Zydus Cadila)

Zydus Cadila’s Vivitra (trastuzumab biosimilar) is marketed in India for breast cancer. Zydus Cadila uses the Selexis technology platform for Vivitra. We are entitled to earn royalties on sales by Zydus Cadila for ten years following the first commercial sale.

Bryxta (Zydus Cadila)

Zydus Cadila’s Bryxta (bevacizumab biosimilar) is marketed in India for non-small cell lung cancer. Zydus Cadila uses the Selexis technology platform for Bryxta. We are entitled to earn royalties on sales by Zydus Cadila for ten years following the first commercial sale.

Summary of Selected Development-stage Programs

We have multiple fully-funded partnered programs that are either in or nearing the regulatory approval process, or given the area of research or value of the license terms we consider particularly noteworthy. We are eligible to receive milestone payments and royalties off of these programs. This list does not include all of our partnered programs. For information about the royalties owed to Ligand for these programs, see “Royalties” later in this business section. In the case of Captisol-related programs, we are also eligible to receive revenue for the sale of Captisol material supply.

Brexanolone-SAGE-547 (SAGE)

Our partner, SAGE, is developing novel medicines to treat life altering central nervous system disorders. In November 2017 SAGE announced positive top-line results from two Phase 3 clinical trials with its proprietary IV formulation of brexanolone (formerly SAGE-547); Study 202B in severe PPD and Study 202C in moderate PPD. SAGE believes these data will be sufficient to support submissions of regulatory applications seeking approval of brexanolone for PPD. SAGE has received Breakthrough Therapy Designation from the FDA and PRIority MEdicines (PRIME) designation by the EMA for SAGE-547 in PPD, which are intended to offer a potentially expedited development path and review for promising drug candidates. This includes increased interaction and guidance from the FDA and EMA. SAGE plans to file a NDA with the FDA in 2018. Ligand has the potential to receive milestone payments, royalties and revenue from Captisol material sales for Captisol-enabled programs. SAGE is responsible for all development costs related to the program.

Sparsentan (Retrophin)

Our partner, Retrophin, is developing sparsentan for orphan indications of severe kidney diseases, and has completed a Phase 2 clinical trial of sparsentan for the treatment of FSGS. Retrophin announced plans to initiate a single Phase 3 clinical trial to enable an NDA filing for sparsentan fo the treatment of FSGS. The trial will include an interim analysis of proteinura as a surrogate endpoint to serve as the basis for an NDA filing for Subpart H accelerated approval of sparsentan. Certain patient groups with severely compromised renal function, including those with FSGS, exhibit extreme proteinuria resulting in progression to dialysis and a high mortality rate. Sparsentan, with its unique dual blockade of angiotensin and endothelin receptors, is expected to provide meaningful clinical benefits in mitigating proteinuria in indications where there are no approved therapies.

Under our license agreement with Retrophin we are entitled to receive potential net milestones of over $75 million in the future and net royalties on future worldwide sales by Retrophin. The royalty term is expected to be 10 years following the first commercial sale. Retrophin is responsible for all development costs related to the program.

Prexasertib- LY2606368 (Eli Lilly)

Our partner, Eli Lilly is conducting Phase 2 clinical trials for Captisol-enabled LY2606368 (Chk 1/2 inhibitor) for solid tumors. Under the terms of the agreement, we may be entitled to regulatory milestones, royalties on potential future sales by Eli Lilly and revenue from Captisol material sales.

BMS986231 (BMS)

Our partner, BMS, is conducting Phase 2 clinical trials for Captisol-enabled CXL-1427 (nitroxyl donor prodrug) for ADHF. Under the terms of the agreement, we may be entitled to development and regulatory milestones, and royalties on potential future sales by BMS and revenue from Captisol material sales.

Lasofoxifene (Sermonix, and Azure Biotech)

Lasofoxifene is an estrogen partial agonist for osteoporosis treatment and other diseases, discovered through the research collaboration between us and Pfizer. Under the terms of the license agreement with Azure, we retained the rights to the oral formulation of lasofoxifene originally developed by Pfizer.

Our partner, Sermonix has a license for the development of oral lasofoxifene for the United States and additional territories. Under the terms of the agreement, we are entitled to receive up to $45 million in potential regulatory and commercial milestone payments as well as royalties on future net sales.

Our partner Azure is developing a novel formulation of lasofoxifene targeting an underserved market in women’s health. Under the terms of our agreement with Azure, we are entitled to receive up to $2.6 million in potential development and regulatory milestones as well as royalties on future net sales through the later of the life of the relevant patents (currently expected to be at least until 2027) or 10 years after regulatory approval. Azure may terminate the license agreement at any time upon six months’ prior notice.

TR-Beta - VK2809 (Viking)

Viking is developing VK2809, a novel selective TR-Beta agonist with potential in multiple indications, including hypercholesterolemia, dyslipidemia, NASH, and X-ALD. Viking initiated a Phase 2 trial for VK2809 in hypercholesterolemia and fatty liver disease in 2016 and expects primary outcome readout this year. Under the terms of the agreement with Viking, we may be entitled to up to $375 million of development, regulatory and commercial milestones and tiered royalties on potential future sales.

SARM - VK5211 (Viking)

Our partner, Viking, is developing VK5211, a novel, potentially best-in-class SARM for patients recovering from hip-fracture. SARMs retain the beneficial properties of androgens without undesired side-effects of steroids or other less selective androgens. Viking announced positive results from its Phase 2 trial in patients who suffered hip fracture in the fourth quarter of 2017. Under the terms of the agreement with Viking, we may be entitled to up to $270 million of development, regulatory and commercial milestones as well as tiered royalties on potential future sales.

Merestinib- LY2801653 (Eli Lilly)

Our partner, Eli Lilly is conducting Phase 2 clinical trials for Captisol-enabled merestinib (LY2801653, formerly known as c-Met inhibitor) for treatment of cancer. Under the terms of the agreement, we may be entitled to regulatory milestones, royalties on potential future sales by Eli Lilly and revenue from Captisol material sales.

Pevonedistat - MLN-4924 (Millennium/Takeda)

Our partner, Millennium/Takeda is currently conducting Phase 2 trials for the development of pevonedistat (MLN-4924) for the treatment of hematological malignancies and solid tumors. Pevonedistat is a Captisol-enabled Nedd8-Activating Enzyme Inhibitor. Under the terms of the clinical-stage agreement, we may be entitled to development milestones from Millennium/Takeda and revenue from Captisol material sales.

BCMAxCD3 (Janssen)

Our partner, Janssen, is developing a BCMAxCD3 antibody discovered with the OmniAb platform technology. Janssen is currently conducting a Phase I trial for cancer therapy. We are entitled to earn milestones based on the development of BCMAxCD3.

AM0001-PD-1 (ARMO Biosciences)

Our partner, ARMO Biosciences, is developing an anti-PD-1 antibody discovered with the OmniAb platform technology. AM0001+PD-1 is a therapeutic target for cancer therapy. We are entitled to earn regulatory milestones and royalties on future sales.

Seribantumab-MM-121 (Merrimack Pharmaceuticals)

Merrimack Pharmaceuticals is currently conducting a Phase 2 trial of seribantumab (MM-121) in patients with heregulin-positive, locally advanced or metastatic non-small cell lung cancer whose disease has progressed following immunotherapy. The FDA has granted fast track designation to facilitate and expedite the development. Seribantumab is an antibody-drug that targets ErbB3 that was developed using the Selexis SUREtechnology Platform. Under the terms of the agreement, we may be entitled to development and commercial milestones, royalties on potential future sales.

CHS-0214 (Coherus Biosciences)

Coherus Biosciences has conducted Phase 3 / MAA-enabling clinical trials for CHS-0214 (etanercept biosimilar) for rheumatoid arthritis and psoriasis. Coherus uses the Selexis’ technology platform for CHS-0214. We are entitled to earn regulatory and sales milestones, and royalties on potential future sales through at least 2026.

Reproxalab (Aldeyra)

Our partner, Aldeyra, is conducting a Phase 2 study for ADX-102 for the treatment of ocular inflammation. ADX-102 is a Captisol-enabled ophthalmic solution for the treatment of allergic conjunctivitis that could be active in a broad array of inflammatory ocular diseases. Under the terms of our agreement with Aldeyra, we are entitled to receive regulatory milestones and royalties on future sales.

Esaxerenone (Exelixis)

Our partner, Exelixis, entered into a collaboration agreement with Daiichi Sankyo and is conducting a Phase 3 pivotal trial (ESAX-HTN) to evaluate esaxerenone (CS-3150) versus eplerenone for essential hypertension in Japanese patients. Under the terms of the agreement with Exelixis, we are entitled to receive a royalty on future sales.

AMG-330 (Amgen)

Our licensee, Amgen, is developing AMG 330 for use in humans for a wide variety of therapeutic indications. Under the terms of the agreement, we are entitled to milestones and royalties on future sales of AMG 330 formulated with Captisol.

Ganaxalone IV (Marinus)

Our partner, Marinus, is preparing to initiate clinical trials with Captisol-enabled ganaxolone IV in patients with postpartum depression (PPD) and status epilepticus (SE). Marinus has exclusive worldwide rights to Captisol-enabled ganaxolone for use in humans.

APVO436 (Aptevo)

Our partner, Aptevo, is developing APVO436 for the treatment of acute myeloid leukemia. There is a high unmet medical need for targeted immunotherapies such as APVO436, that can potentially treat patients with relapsed or refractory disease, or patients who cannot tolerate traditional chemotherapy. Under the terms of the agreement with Aptevo, we are entitled to milestones and royalties on future sales.

Royalties

We have multiple programs under license with other companies that have products that are already being commercialized. In addition to the table below, we have generally described a typical Captisol and OmniAb royalty arrangement as low- to mid-single digit royalties. The following table represents substantially all of the disclosed information about our royalty arrangements:

Royalty Table



Ligand Licenses With Tiered Royalties, Tiers Disclosed*
Promacta (Novartis)		Kyprolis (Amgen)		Duavee (Pfizer)		Viviant/Conbriza (Pfizer)
< $100 million	4.7%	< $250 million	1.5%	<$400 million	0.5%	<$400 million	0.5%
$100 to $200 million	6.6%	$250 to $500 million	2.0%	$400 million to $1.0 billion	1.5%	$400 million to $1.0 billion	1.5%
$200 to $400 million	7.5%	$500 to $750 million	2.5%	>$1.0 billion	2.5%	>$1.0 billion	2.5%
$400 million to $1.5 billion	9.4%	>$750 million	3.0%
>$1.5 billion	9.3%



CE-Topiramate (CURx)		CE-Budesonide (Sedor)		CE-Meloxicam (Sedor)
< $50 million	6.0%	< $25 million	8.0%	< $25 million	8.0%
$50 to $100 million	6.8%	> $25 million	10.0%	> $25 million	10.0%
>$100 million	7.5%



Ligand Licenses With Tiered Royalties, Tiers Undisclosed*
Program	Licensee	Royalty Rate
IRAK4	TG Therapeutics	6.0% - 9.5%
CE-Lamotrigine	CURx	4.0% - 7.0%
Lasofoxifene	Sermonix	6.0% - 10.0%
FBPase Inhibitor (VK0612)	Viking	7.5% - 9.5%
SARM (VK5211)	Viking	7.25% - 9.25%
TR Beta (VK2809 and VK0214)	Viking	3.5% - 7.5%
Oral EPO	Viking	4.5% - 8.5%
DGAT-1	Viking	3.0% - 7.0%
Various	Nucorion	4.0%-9.0%
Various	Seelos	4.0%-10.0%



Ligand Licenses With Fixed Royalties*
Program	Licensee	Royalty Rate
Evomela	Spectrum Pharma	20%
Baxdela	Melinta	2.5%
Brexalalone (SAGE-547)	SAGE	3%
Sparsentan	Retrophin	9%
CE-Fosphenytoin	Sedor	11%
Pradefovir	Chiva Pharma	9%
MB07133	Chiva Pharma	6%
KLM465	Novartis	14.5% (6.5% in year one)
Topical lasofoxifene	Azure Biotech	5%
MM-121	Merrimack Pharma	<1.0%
MM-141	Merrimack Pharma	<1.0%
ME-143	MEI Pharma	Low single digit royalty
ME-344	MEI Pharma	Low single digit royalty
Reproxalab	Aldeyra Therapeutics	Low single digit royalty

*Royalty rates are shown net of sublicense payments. Royalty tier references for specific rates notated in the table are for up to and including the dollar amount referenced. Higher tiers are only applicable for the dollar ranges specified in the table.

Primary Internal Development Program - Glucagon Receptor Antagonist Program

We are currently developing a small molecule glucagon receptor antagonist for the treatment of T2 DM. Compounds that block the action of glucagon may reduce the hyperglycemia that is characteristic of the disease. Glucagon stimulates the production of glucose by the liver and its release into the blood stream. In diabetic patients, glucagon secretion is abnormally elevated and contributes to hyperglycemia in these patients. We announced results in 2016 from two Phase 1 clinical trials which demonstrated favorable safety, tolerability and pharmacokinetics in normal healthy volunteers and in subjects with T2 DM. The trial results also demonstrate a robust, dose-dependent reduction of fasting plasma glucose. In September 2017, we presented positive top-line results from a Phase 2 clinical study evaluating the efficacy and safety of LGD-6972, as an adjunct to diet and exercise, in subjects with T2DM inadequately controlled on metformin monotherapy. LGD-6972 was safe and well tolerated, with no drug-related serious adverse events and no dose dependent changes in lipids, body weight or blood pressure after 12 weeks of treatment.

The following table represents other internal programs eligible for further development funding, either through Ligand or a partner:



Program	Development Stage	Indication
CCR1 Antagonist	Preclinical	Oncology
CCR5 Antagonist	Preclinical	Anti-infective
CE-Busulfan	Preclinical	Oncology
CE-Cetirizine Injection	Preclinical	Allergy
CE-Clopidogrel	Phase 3	Anti-coagulant
CE-Sertraline, Oral Concentrate	Phase 1	Depression
CE-Silymarin for Topical Formulation	Preclinical	Sun damage
CE-Iohexol	Preclinical	Injectable diagnostic contrast agent
FLT3 Kinase Inhibitors	Preclinical	Oncology
GCSF Receptor Agonist	Preclinical	Blood disorders
Liver Specific Glucokinase Activator	Preclinical	Diabetes
LTP-statin	Preclinical	Dyslipidemia

Manufacturing

We contract with a third party manufacturer, Hovione, for Captisol production. Hovione is a global supplier with over 50 years of experience in the development and manufacture of APIs and Drug Product Intermediates. Hovione operates FDA-inspected sites in the United States, Macau, Ireland and Portugal. Manufacturing operations for Captisol are currently performed at two sites, in both of Hovione's Portugal and Ireland facilities with distribution operations also performed from Hovione's Portugal and Ireland sites. Additionally, we also store and distribute Captisol from a subterranean warehouse controlled by Ligand and located in Kansas. We believe we maintain adequate inventory of Captisol to meet our current and future partner needs.

In the event of a Captisol supply interruption, we are permitted to designate and, with Hovione’s assistance, qualify one or more alternate suppliers. If the supply interruption continues beyond a designated period, we may terminate the agreement. In addition, if Hovione cannot supply our requirements of Captisol due to an uncured force majeure event, we may also obtain Captisol from a third party and have previously identified such parties.

The current term of the agreement with Hovione is through December 2024. The agreement will automatically renew for successive two year renewal terms unless either party gives written notice of its intention to terminate the agreement no less than two years prior to the expiration of the initial term or renewal term. In addition, either party may terminate the agreement for the uncured material breach or bankruptcy of the other party or an extended force majeure event. We may terminate the agreement for extended supply interruption, regulatory action related to Captisol or other specified events. We have ongoing minimum purchase commitments under the agreement.

For further discussion of these items, see below under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Competition

Some of the drugs we and our licensees and partners are developing may compete with existing therapies or other drugs in development by other companies. Furthermore, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with respect to potentially competing products or technologies and may establish collaborative arrangements with our competitors.

Our Captisol business may face competition from other suppliers of similar cyclodextrin excipients or other technologies that are aimed to increase solubility or stability of APIs. Our OmniAb antibody technology faces competition from suppliers of other transgenic animal systems that are also available for antibody drug discovery.

Our competitive position also depends upon our ability to obtain patent protection or otherwise develop proprietary products or processes. For a discussion of the risks associated with competition, see below under “Item 1A. Risk Factors.”

Government Regulation

The research and development, manufacturing and marketing of pharmaceutical products are subject to regulation by numerous governmental authorities in the United States and other countries. We and our partners, depending on specific activities performed, are subject to these regulations. In the United States, pharmaceuticals are subject to regulation by both federal and various state authorities, including the FDA. The Federal Food, Drug and Cosmetic Act and the Public Health Service Act govern the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of pharmaceutical products and there are often comparable regulations that apply at the state level. There are similar regulations in other countries as well. For both currently marketed and products in development, failure to comply with applicable regulatory requirements can, among other things, result in delays, the suspension of regulatory approvals, as well as possible civil and criminal sanctions. In addition, changes in existing regulations could have a material adverse effect on us or our partners. For a discussion of the risks associated with government regulations, see below under “Item 1A. Risk Factors.”

Patents and Proprietary Rights

We believe that patents and other proprietary rights are important to our business. Our policy is to file patent applications to protect technology, inventions and improvements to our inventions that are considered important to the development of our business. We also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position.

Patents are issued or pending for the following key products or product families. The scope and type of patent protection provided by each patent family is defined by the claims in the various patents. The nominal patent expiration dates have been provided. The actual patent term may vary by jurisdiction and depend on a number of factors including potential patent term adjustments, patent term extensions, and terminal disclaimers. For each product or product family, the patents and/or applications referred to are in force in at least the United States, and for most products and product families, the patents and/or applications are also in force in European jurisdictions, Japan and other jurisdictions.

Promacta

Patents covering Promacta are owned by Novartis. The United States patent listed in the FDA’s Orange Book relating to Promacta with the latest expiration date is not expected to expire until 2027. Six months of additional exclusivity has been granted due to pediatric studies conducted by GSK. The type of patent protection (e.g., composition of matter or use) for each patent listed in the Orange Book and the expiration date for each patent listed in the Orange Book are provided in the following table. In addition, certain related patents in the commercially important jurisdictions of Europe and Japan are identified in the following table.



Promacta
United States			Corresponding Foreign
Type of Protection	U.S. Patent No.	U.S. Expiration Date	Jurisdiction	Patent Number	Expiration Date‡
CoM / Use	6,280,959	10/30/2018	N/A
CoM / Use	7,160,870	11/20/2022	EU	1,864,981	5/24/2021
			EU	1,294,378	5/24/2021
			Japan	3,813,875	5/24/2021
Use	7,332,481	5/24/2021	EU	1,889,838	5/24/2021
Use	7,332,481	5/24/2021	Japan	4,546,919	5/24/2021
CoM / Use	7,452,874	5/24/2021	EU	1,889,838	5/24/2021
CoM / Use	7,452,874	5/24/2021	Japan	4,546,919	5/24/2021
CoM / Use	7,473,686	5/24/2021	EU	1,864,981	5/24/2021
			EU	1,294,378	5/24/2021
			Japan	3,813,875	5/24/2021
CoM / Use	7,547,719	7/13/2025	EU	1,534,390	5/21/2023
CoM / Use	7,547,719	7/13/2025	Japan	4,612,414	5/21/2023
Use	7,790,704	5/24/2021	N/A
Use	7,795,293	5/21/2023	N/A
CoM / Use	8,052,993	8/1/2027	EU	2,152,237	8/1/2027
			Japan	5,419,866	8/1/2027
			Japan	5,735,078	8/1/2027
CoM / Use	8,052,994	8/1/2027	EU	2,152,237	8/1/2027
			Japan	5,419,866	8/1/2027
			Japan	5,735,078	8/1/2027
CoM / Use	8,052,995	8/1/2027	EU	2,152,237	8/1/2027
			Japan	5,419,866	8/1/2027
			Japan	5,735,078	8/1/2027
CoM / Use	8,062,665	8/1/2027	EU	2,152,237	8/1/2027
			Japan	5,419,866	8/1/2027
			Japan	5,735,078	8/1/2027
CoM / Use	8,071,129	8/1/2027	EU	2,152,237	8/1/2027
			Japan	5,419,866	8/1/2027
			Japan	5,735,078	8/1/2027
CoM / Use	8,828,430	8/1/2027	EU	2,152,237	8/1/2027
			Japan	5,419,866	8/1/2027
			Japan	5,735,078	8/1/2027

^‡Expiration dates of European and Japanese patents are calculated as 20 years from the earliest nonprovisional filing date to which priority is claimed, and do not take into account extensions that are or may be available in these jurisdictions.

Kyprolis

Patents protecting Kyprolis include those owned by Amgen and those owned by us. The United States patent listed in the Orange Book relating to Kyprolis with the latest expiration date is not expected to expire until 2029. Patents and applications owned by Ligand relating to the Captisol component of Kyprolis are not expected to expire until 2033. The type of patent protection (e.g., composition of matter or use) for each patent listed in the Orange Book and the expiration dates for each patent listed in the Orange Book are provided in the following table. In addition, certain related patents in the commercially important jurisdictions of Europe and Japan are identified in the following table.



Kyprolis
United States			Corresponding Foreign
Type of Protection	U.S. Patent No.	U.S. Expiration Date	Jurisdiction	Patent Number	Expiration Date‡
CoM	7,232,818	4/14/2025	EU	1,745,064	4/14/2025
CoM	7,232,818	4/14/2025	Japan	5,394,423	4/14/2025
CoM	7,417,042	7/20/2026	EU	1,781,688	8/8/2025
CoM	7,417,042	7/20/2026	Japan	4,743,720	8/8/2025
Use	7,491,704	4/14/2025	EU	1,745,064	4/14/2025
Use	7,491,704	4/14/2025	Japan	5,394,423	4/14/2025
CoM	7,737,112	12/7/2027	EU	1,819,353	12/7/2025
			EU	2,260,835	12/7/2025
			EU	2,261,236	12/7/2025
			Japan	4,990,155	12/7/2025
			Japan	5,108,509	5/9/2025
Use	8,129,346	4/14/2025	EU	1,745,064	4/14/2025
Use	8,129,346	4/14/2025	Japan	5,394,423	4/14/2025
CoM	8,207,125	4/14/2025	EU	1,781,688	8/8/2025
CoM	8,207,125	4/14/2025	Japan	4,743,720	8/8/2025
CoM / Use	8,207,126	4/14/2025	N/A
Use	8,207,127	4/14/2025	N/A
CoM / Use	8,207,297	4/14/2025	N/A
Use	9,511,109	10/21/2029	Japan	5,675,629	10/21/2029

Captisol

Patents and pending patent applications covering Captisol are owned by us. Other patents and pending patent applications covering methods of making Captisol are owned by Ligand or by Pfizer. The patents covering the Captisol product, if issued, with the latest expiration date would not be set to expire until 2033 (see, e.g., U.S. Patent No. 9,493,582 (expires Feb. 27, 2033)). We also own several patents and pending patent applications covering drug products containing Captisol as a component. The type of patent protection (e.g., composition of matter or use) and the expiration dates for several issued patents covering Captisol are provided in the following table. In addition, certain related patents and applications in the commercially important jurisdictions of Europe and Japan are listed in the following table.



Captisol
United States			Corresponding Foreign
Type of Protection	U.S. Patent No.	U.S. Expiration Date	Jurisdiction	Patent Number	Expiration Date‡
CoM	8,114,438	3/19/2028	EU	2,708,225	pending
CoM	8,114,438	3/19/2028	Japan	2015-163634	pending
CoM	7,629,331	10/26/2025	EU	1,945,228	10/26/2025
			EU	2,335,707	10/26/2025
			EU	2,581,078	10/26/2025
Use	8,049,003	12/19/2026	EU	2,583,668	10/26/2025
CoM	8,846,901	10/26/2025	EU	1,945,228	10/26/2025
			EU	2,335,707	10/26/2025
			EU	2,581,078	10/26/2025
CoM	8,829,182	10/26/2025	EU	1,945,228	10/26/2025
			EU	2,335,707	10/26/2025
			EU	2,581,078	10/26/2025
CoM / Use	7,635,773	3/13/2029	EU	2,268,269	pending
			Japan	4,923,144	4/28/2029
			Japan	6,039,721	4/28/2029
			Japan	2016-216021	pending
CoM	8,410,077	3/13/2029	EU	2,268,269	pending
			Japan	4,923,144	4/28/2029
			Japan	6,039,721	4/28/2029
			Japan	2016-216021	pending
CoM	9,200,088	3/13/2029	EU	2,268,269	pending
			Japan	4,923,144	4/28/2029
			Japan	6,039,721	4/28/2029
			Japan	2016-216021	pending
CoM	9,493,582	2/27/2033	EU	2,748,205	pending
			Japan	2016-166368	pending

^‡ Expiration date of European and Japanese patents are calculated as 20 years from the earliest nonprovisional filing date to which priority is claimed, and do not take into account extensions that are or may be available in these jurisdictions.

Subject to compliance with the terms of the respective agreements, our rights to receive royalty payments under our licenses with our exclusive licensors typically extend for the life of the patents covering such developments. For a discussion of the risks associated with patent and proprietary rights, see below under “Item 1A. Risk Factors.”

OmniAb & OmniChicken

Ligand has received patent protection in 27 countries, including the United States, multiple countries throughout Europe, Japan and China (see selected cases listed in the table below) and has 19 patent applications pending worldwide. The patents and applications owned by Ligand are expected to expire between 2028 and 2033 and partners are able to use the OMT patented technology to generate novel antibodies, which may be entitled to additional patent protection.



OmniAb
United States			Corresponding Foreign
Type of Protection	U.S. Patent No.	U.S. Expiration Date	Jurisdiction	Patent Number	Expiration Date‡
			EU	2,152,880	5/30/2028
			EU	2,336,329	5/30/2028
CoM	8,703,485	10/10/2031	Japan	5,823,690	5/30/2028
	9,388,233	5/30/2028	N/A
Use	8,907,157	5/30/2028	N/A
CoM / Use	9,475,859	4/15/2034	N/A



OmniChicken
United States			Corresponding Foreign
Type of Protection	U.S. Patent No.	U.S. Expiration Date	Jurisdiction	Patent Number	Expiration Date‡
CoM/Use	8,030,095	12/23/2029	Europe	2,271,657	3/2/2029
MoM	8,415,173	3/2/2029	Japan	5,737,707	3/2/2029
CoM	8,592,644	8/30/2030	Japan	5,756,802	8/11/2030

CoM	9,404,125	12/29/2030
Use	9,549,538	8/11/2030
CoM/MoM/Use	8,865,462	5/8/2032	N/A
Com/MoM/Use	9,644,178	1/7/2031
CoM	9,380,769	5/23/2032	Europe	2,713,712	5/23/2032
CoM	9,809,642	5/23/2032
CoM/Use	9,394,372	10/16/2032	N/A

LGD-6972 (Glucagon Receptor Antagonist)

Patents and pending patent applications covering LGD-6972 are owned by Ligand. Patents covering various forms of LGD-6972, if issued, with the latest expiration date would not be expected to expire until 2039. The type of patent protection (e.g., composition of matter or use) and the expiration dates for several issued patents covering LGD-6972 are provided in the following table. In addition, certain related patents and applications in the commercially important jurisdictions of Europe and Japan are listed in the following table.



LGD-6972
United States			Corresponding Foreign
Type of Protection	U.S. Patent No.	U.S. Expiration Date	Jurisdiction	Patent Number	Expiration Date‡
CoM	8,710,236	2/11/2028	EU	2,129,654	2/11/2028
			EU	2,786,985	pending
			Japan	5,322,951	2/11/2028
			Japan	2015-196171	pending
CoM	9,169,201	2/11/2028	EU	2,129,654	2/11/2028
			EU	2,786,985	pending
			Japan	5,322,951	2/11/2028
			Japan	2015-196171	pending
Use	9,701,626	2/11/2028	EU	2,129,654	2/11/2028
			EU	2,786,985	pending
			Japan	5,322,951	2/11/2028
CoM / Use	8,907,103	1/2/2031	EU	2,326,618	8/13/2029
			EU	2,799,428	8/13/2029
			EU	3,153,501	pending
			Japan	5,684,126	8/13/2029
			Japan	2016-251460	pending
			Japan	2018-006976	pending
Com	9,783,494	8/13/2029	EU	2,326,618	8/13/2029
			EU	2,799,428	8/13/2029
			EU	3,153,501	pending
			Japan	5,684,126	8/13/2029

Human Resources

As of February 16, 2018, we had 39 full-time employees, of whom 25 are involved directly in scientific research and development activities.

Investor Information

Financial and other information about us is available on our website at www.ligand.com. We make available on our website copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission, or SEC. In addition, we have previously filed registration statements and other documents with the SEC. Any document we file may be inspected, at the SEC’s public reference room at 100 F Street NE, Washington, DC 20549, or at the SEC’s internet address at www.sec.gov. These website addresses are not intended to function as hyperlinks, and the information contained in our website and in the SEC’s website is not intended to be a part of this filing. Information related to the operation of the SEC’s public reference room may be obtained by calling the SEC at 800-SEC-0330.



ITEM 1A.	RISK FACTORS

The following is a summary description of some of the many risks we face in our business. You should carefully review these risks in evaluating our business, including the businesses of our subsidiaries. You should also consider the other information described in this report. Additional risk no presently known to us or that we currently deem immaterial also may impair our business.

Future revenue based on Promacta, Kyprolis and Evomela, as well as sales of our other products, may be lower than expected.

Novartis is obligated to pay us royalties on its sales of Promacta, and we receive revenue from Amgen based on both sales of Kyprolis and purchases of Captisol material for clinical and commercial uses. These payments are expected to be a substantial portion of our ongoing revenues for some time. In addition, we receive revenues based on sales of Evomela and other products. Any setback that may occur with respect to any of our partners' products, and in particular Promacta or Kyprolis, could significantly impair our operating results and/or reduce our revenue and the market price of our stock. Setbacks for the products could include problems with shipping, distribution, manufacturing, product safety, marketing, government regulation or reimbursement, licenses and approvals, intellectual property rights, competition with existing or new products and physician or patient acceptance of the products, as well as higher than expected total rebates, returns, discounts, or unfavorable exchange rates. These products also are or may become subject to generic competition.

Future revenue from sales of Captisol material to our license partners may be lower than expected.

Revenues from sales of Captisol material to our collaborative partners represent a significant portion of our current revenues. Any setback that may occur with respect to Captisol could significantly impair our operating results and/or reduce the market price of our stock. Setbacks for Captisol could include problems with shipping, distribution, manufacturing, product safety, marketing, government regulation or reimbursement, licenses and approvals, intellectual property rights, competition with existing or new products and physician or patient acceptance of the products using Captisol.

If products or product candidates incorporating Captisol material were to cause any unexpected adverse events, the perception of Captisol safety could be seriously harmed. If this were to occur, we may not be able to sell Captisol unless and until we are able to demonstrate that the adverse event was unrelated to Captisol, which we may not be able to do. Further, the FDA could require us to submit additional information for regulatory review or approval, including data from extensive safety testing or clinical testing of products using Captisol. This would be expensive and it may delay the marketing of Captisol-enabled products and receipt of revenue related to those products, which could significantly impair our operating results and/or reduce the market price of our stock.

We obtain Captisol from a sole source supplier, and if this supplier were to cease to be able, for any reason, to supply Captisol to us in the amounts we require, or decline to supply Captisol to us, we would be required to seek an alternative source, which could potentially take a considerable length of time and impact our revenue and customer relationships. We maintain inventory of Captisol, which has a five year shelf life, at three geographically dispersed storage locations in the United States and Europe. If we were to encounter problems maintaining our inventory, such as natural disasters, at one or more of these locations, it could lead to supply interruptions. While we believe we maintain adequate inventory of Captisol to meet our current and expected future partner needs, our estimates and projections for Captisol demand may be wrong and any supply interruptions could materially adversely impact our operating results.

We currently depend on our arrangements with our partners and licensees to sell products using our Captisol technology. These agreements generally provide that our partners may terminate the agreements at will. If our partners discontinue sales of products using Captisol, fail to obtain regulatory approval for products using Captisol, fail to satisfy their obligations under their agreements with us, or choose to utilize a generic form of Captisol should it become available, or if we are unable to establish new licensing and marketing relationships, our financial results and growth prospects would be materially affected. Furthermore, we maintain significant accounts receivable balances with certain customers purchasing Captisol materials, which may result in the concentration of credit risk. We generally do not require any collateral from our customers to secure payment of these accounts receivable. If any of our major customers were to default in the payment of their obligations to us, our business, operating results and cash flows could be adversely affected.

Further, under most of our Captisol outlicenses, the amount of royalties we receive will be reduced or will cease when the relevant patent expires. Our low-chloride patents and foreign equivalents are not expected to expire until 2033, our high purity patents and foreign equivalents, are not expected to expire until 2029 and our morphology patents and foreign equivalents, are not expected to expire until 2025, but the initially filed patents relating to Captisol expired starting in 2010 in the United States and in 2016 in most countries outside the United States. If our other intellectual property rights are not sufficient to prevent a generic form of Captisol from coming to market and if in such case our partners choose to terminate their agreements with us, our Captisol revenue may decrease significantly.

Third party intellectual property may prevent us or our partners from developing our potential products; our and our partners’ intellectual property may not prevent competition; and any intellectual property issues may be expensive and time consuming to resolve.

The manufacture, use or sale of our potential products or our licensees' products or potential products may infringe the patent rights of others. If others obtain patents with conflicting claims, we may be required to obtain licenses to those patents or to develop or obtain alternative technology. We may not be able to obtain any such licenses on acceptable terms, or at all. Any failure to obtain such licenses could delay or prevent us from pursuing the development or commercialization of our potential products.

Generally, our success will depend on our ability and the ability of our partners to obtain and maintain patents and other intellectual property rights for our and their potential products. Our patent position is uncertain and involves complex legal and technical questions for which legal principles are unresolved. Even if we or our partners do obtain patents, such patents may not adequately protect the technology we own or have licensed.

We permit our partners to list our patents that cover their branded products in the Orange Book. If a third party files an NDA or ANDA for a generic drug product that relies in whole or in part on studies contained in our partner’s NDA for their branded product, the third party will have the option to certify to the FDA that, in the opinion of that third party, the patents listed in the Orange Book for our partner’s branded product are invalid, unenforceable, or will not be infringed by the manufacture, use or sale of the third party’s generic drug product. A third party certification that a new product will not infringe Orange Book-listed patents, or that such patents are invalid, is called a paragraph IV patent certification. If the third party submits a paragraph IV patent certification to the FDA, a notice of the paragraph IV patent certification must be sent to the NDA owner and the owner of the patents that are subject to the paragraph IV patent certification notice once the third-party’s NDA or ANDA is accepted for filing by the FDA. A lawsuit may then be initiated to defend the patents identified in the notice. The filing of a patent infringement lawsuit within 45 days of the receipt of notice of a paragraph IV patent certification automatically prevents the FDA from approving the generic NDA or ANDA until the earlier of the expiration of a 30-month period, the expiration of the patents, the entry of a settlement order stating that the patents are invalid or not infringed, a decision in the infringement case that is favorable to the NDA or ANDA applicant, or such shorter or longer period as the court may order. If a patent infringement lawsuit is not initiated within the required 45-day period, the third-party’s NDA or ANDA will not be subject to the 30-month stay.

Several third-parties have challenged, and additional third parties may challenge, the patents covering our partner’s branded products, including Kyprolis and Evomela, which could result in the invalidation or unenforceability of some or all of the relevant patent claims. We may from time to time become party to litigation or other proceedings as a result of Paragraph IV certifications. For example, in November 2017, CyDex, our wholly owned subsidiary, received a paragraph IV certification from Teva Pharmaceuticals USA, Inc., Teva Pharmaceutical Industries Ltd. and Actavis, LLC (collectively “Teva”) alleging that certain of our patents related to Captisol were invalid, unenforceable and/or will not be infringed by Teva’s ANDA related to Spectrum Pharmaceuticals’ NDA for Evomela. On December 20, 2017, CyDex filed a complaint against Teva in the U.S. District Court for the District of Delaware, asserting that Teva’fs ANDA would infringe our patents.

Litigation or other proceedings to enforce or defend intellectual property rights are often very complex in nature, may be very expensive and time-consuming, may divert our management’s attention from our core business, and may result in unfavorable results that could adversely impact our ability to prevent third parties from competing with our partner’s products. Any adverse outcome of such litigation could result in one or more or our patents being held invalid or unenforceable, which could adversely affect our ability to successfully execute our business strategy and negatively impact our financial condition and results of operations. However, given the unpredictability inherent in litigation, we cannot predict or guarantee the outcome of these matters or any other litigation. Regardless of how these matters are ultimately resolved, these matters may be costly, time-consuming and distracting to our management, which could have a material adverse effect on our business.

In addition, periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and or applications will be due to the U.S. and various foreign patent offices at various points over the lifetime of our and our licensees’ patents and/or applications. We have systems in place to remind us to pay these fees, and we rely on our outside patent annuity service to pay these fees when due. Additionally, the U.S. and various foreign patent offices require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with rules applicable to the particular jurisdiction. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or

complete loss of patent rights in the relevant jurisdiction. If such an event were to occur, it could have a material adverse effect on our business.

Any conflicts with the patent rights of others could significantly reduce the coverage of our patents or limit our ability to obtain meaningful patent protection. For example, our European patent related to Agglomerated forms of Captisol was limited during an opposition proceeding, and the rejection of our European patent application related to High Purity Captisol is currently being appealed. In addition, any determination that our patent rights are invalid may result in early termination of our agreements with our license partners and could adversely affect our ability to enter into new license agreements. We also rely on unpatented trade secrets and know-how to protect and maintain our competitive position. We require our employees, consultants, licensees and others to sign confidentiality agreements when they begin their relationship with us. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our competitors may independently discover our trade secrets.

We may also need to initiate litigation, which could be time-consuming and expensive, to enforce our proprietary rights or to determine the scope and validity of others' rights. If this occurs, a court may find our patents or those of our licensors invalid or may find that we have infringed on a competitor's rights. In addition, if any of our competitors have filed patent applications in the United States which claim technology we also have invented, the United States Patent and Trademark Office may require us to participate in expensive interference proceedings to determine who has the right to a patent for the technology.

The occurrence of any of the foregoing problems could be time-consuming and expensive and could adversely affect our financial position, liquidity and results of operations.

We rely heavily on licensee relationships, and any disputes or litigation with our partners or termination or breach of any of the related agreements could reduce the financial resources available to us, including milestone payments and future royalty revenues.

Our existing collaborations may not continue or be successful, and we may be unable to enter into future collaborative arrangements to develop and commercialize our unpartnered assets. Generally, our current collaborative partners also have the right to terminate their collaborations at will or under specified circumstances. If any of our collaborative partners breach or terminate their agreements with us or otherwise fail to conduct their collaborative activities successfully (for example, by not making required payments when due, or at all), our product development under these agreements will be delayed or terminated. Disputes or litigation may also arise with our collaborators (with us and/or with one or more third parties), including those over ownership rights to intellectual property, know-how or technologies developed with our collaborators. For example, we are asserting our rights to receive payment against one of our collaborative partners which could harm our relationship with such partner. Such disputes or litigation could adversely affect our rights to one or more of our product candidates and could delay, interrupt or terminate the collaborative research, development and commercialization of certain potential products, create uncertainty as to ownership rights of intellectual property, or could result in litigation or arbitration. In addition, a significant downturn or deterioration in the business or financial condition of our collaborators or partners could result in a loss of expected revenue and our expected returns on investment. The occurrence of any of these problems could be time-consuming and expensive and could adversely affect our business.

Our product candidates, and the product candidates of our partners, face significant development and regulatory hurdles prior to partnering and/or marketing which could delay or prevent licensing, sales-based royalties and/or milestone revenue.

Before we or our partners obtain the approvals necessary to sell any of our unpartnered assets or partnered programs, we must show through preclinical studies and human testing that each potential product is safe and effective. We and/or our partners have a number of partnered programs and unpartnered assets moving toward or currently awaiting regulatory action. Failure to show any product's safety and effectiveness could delay or prevent regulatory approval of a product and could adversely affect our business. The drug development and clinical trials process is complex and uncertain. For example, the results of preclinical studies and initial clinical trials may not necessarily predict the results from later large-scale clinical trials. In addition, clinical trials may not demonstrate a product's safety and effectiveness to the satisfaction of the regulatory authorities. A number of companies have suffered significant setbacks in advanced clinical trials or in seeking regulatory approvals, despite promising results in earlier trials. The FDA may also require additional clinical trials after regulatory approvals are received. Such additional trials may be expensive and time-consuming, and failure to successfully conduct those trials could jeopardize continued commercialization of a product.

The speed at which we and our partners complete our scientific studies and clinical trials depends on many factors, including, but not limited to, the ability to obtain adequate supplies of the products to be tested and patient enrollment. Patient enrollment is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial and other potential drug candidates being studied. Delays in patient enrollment for our or our partners’ trials may result in increased costs and longer development times. In addition, our partners have rights to control

product development and clinical programs for products developed under our collaborations. As a result, these partners may conduct these programs more slowly or in a different manner than expected. Moreover, even if clinical trials are completed, we or our partners still may not apply for FDA or foreign regulatory approval in a timely manner or the FDA or foreign regulatory authority still may not grant approval.

Our drug discovery, early-stage drug development, and product reformulation programs may require substantial additional capital to complete successfully. Our partner's drug development programs may require substantial additional capital to complete successfully, arising from costs to: conduct research, preclinical testing and human studies; establish pilot scale and commercial scale manufacturing processes and facilities; and establish and develop quality control, regulatory, marketing, sales and administrative capabilities to support these programs. While we expect to fund our research and development activities from cash generated from operations to the extent possible, if we are unable to do so, we may need to complete additional equity or debt financings or seek other external means of financing. These financings could depress our stock price. If additional funds are required to support our operations and we are unable to obtain them on terms favorable to us, we may be required to cease or reduce further development or commercialization of our products, to sell some or all of our technology or assets or to merge with another entity.

Our OmniAb antibody platform faces specific risks, including the fact that no drug using antibodies from the platform has yet advanced to late stage clinical trials.

None of our collaboration partners using our OmniAb antibody platform have tested drugs based on the platform in clinical trials and, therefore, none of our OmniAb collaboration partners’ drugs have received FDA approval. If one of our OmniAb collaboration partners’ drug candidates fails during preclinical studies or clinical trials, our other OmniAb collaboration partners may decide to abandon drugs using antibodies generated from the OmniAb platform, whether or not attributable to the platform. All of our OmniAb collaboration partners may terminate their programs at any time without penalty. In addition, our OmniRat and OmniFlic platforms, which we consider the most promising, are covered by two patents within the U.S. and two patents in the European Union and are subject to the same risks as our patent portfolio discussed above, including the risk that our patents may infringe on third party patent rights or that our patents may be invalidated. Further, we face significant competition from other companies selling human antibody-generating rodents, especially mice which compete with our OmniMouse platform, including the VelocImmune mouse, the AlivaMab mouse, the Trianni mouse and the Kymouse. Many of our competitors have greater financial, technical and human resources than we do and may be better equipped to develop, manufacture and market competing antibody platforms.

If plaintiffs bring product liability lawsuits against us or our partners, we or our partners may incur substantial liabilities and may be required to limit commercialization of our approved products and product candidates.

As is common in our industry, our partners and we face an inherent risk of product liability as a result of the clinical testing of our product candidates in clinical trials and face an even greater risk for commercialized products. Although we are not currently a party to product liability litigation, if we are sued, we may be held liable if any product or product candidate we develop causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale. Regardless of merit or eventual outcome, liability claims may result in decreased demand for any product candidates, partnered products or products that we may develop, injury to our reputation, discontinuation of clinical trials, costs to defend litigation, substantial monetary awards to clinical trial participants or patients, loss of revenue and product recall or withdrawal from the market and the inability to commercialize any products that we develop. We have product liability insurance that covers our clinical trials up to a $10.0 million annual limit. Our insurance coverage may not be sufficent to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer. If we are sued for any injury caused by our product candidates, partnered products or any future products, our liability could exceed our total assets.

Market acceptance and sales of any approved product will depend significantly on the availability and adequacy of coverage and reimbursement from third-party payors and may be affected by existing and future healthcare reform measures.

Sales of the products we license to our collaboration partners and the royalties we receive will depend in large part on the extent to which coverage and reimbursement is available from government and health administration authorities, private health maintenance organizations and health insurers, and other healthcare payors. Significant uncertainty exists as to the reimbursement status of healthcare products. Healthcare payors, including Medicare, are challenging the prices charged for medical products and services. Government and other healthcare payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for medical products. Even if a product is approved by the FDA, insurance coverage may not be available, and reimbursement levels may be inadequate, to cover the costs associated with the research, development, marketing and sale of the product. If government and other healthcare payors do not provide adequate coverage and reimbursement levels for any product, market acceptance and any sales could be reduced.

From time to time, legislation is implemented to reign in rising healthcare expenditures. By way of example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, was enacted, which included a number of provisions affecting the pharmaceutical industry, including, among other things, annual, non-deductible fees on any entity that manufactures or imports some types of branded prescription drugs and increases in Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future.

Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We cannot predict whether other legislative changes will be adopted, if any, or how such changes would affect our operations or financial condition.

We and our collaboration partners may be subject to federal and state healthcare laws, including fraud and abuse, false claims, physician payment transparency and health information privacy and security laws. Our operations and those of our collaboration partners are subject to various federal and state fraud and abuse laws, including, without limitation, anti-kickback, false claims and physician payment transparency statutes. These laws may impact, among other things, financial arrangements with physicians, sales, marketing and education programs and the manner in any of those activities are implemented. In addition, we may be subject to federal and state patient privacy regulations. If our operations or those of our collaboration partners are found to be in violation of any of those laws or any other applicable governmental regulations, we or our collaboration partners may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment, exclusion from government healthcare programs or the curtailment or restructuring of operations, any of which could adversely affect our ability to operate our business and our financial condition.

Any difficulties from strategic acquisitions could adversely affect our stock price, operating results and results of operations.

We may acquire companies, businesses and products that complement or augment our existing business. We may not be able to integrate any acquired business successfully or operate any acquired business profitably. Integrating any newly acquired business could be expensive and time-consuming. Integration efforts often take a significant amount of time, place a significant strain on managerial, operational and financial resources and could prove to be more difficult or expensive than we predict. The diversion of our management's attention and any delay or difficulties encountered in connection with any future acquisitions we may consummate could result in the disruption of our on-going business or inconsistencies in standards and controls that could negatively affect our ability to maintain third-party relationships. Moreover, we may need to raise additional funds through public or private debt or equity financing, or issue additional shares, to acquire any businesses or products, which may result in dilution for stockholders or the incurrence of indebtedness.

As part of our efforts to acquire companies, business or product candidates or to enter into other significant transactions, we conduct business, legal and financial due diligence with the goal of identifying and evaluating material risks involved in the transaction. Despite our efforts, we ultimately may be unsuccessful in ascertaining or evaluating all such risks and, as a result, might not realize the intended advantages of the transaction. If we fail to realize the expected benefits from acquisitions we may consummate in the future or have consummated in the past, whether as a result of unidentified risks, integration difficulties, regulatory setbacks, litigation with current or former employees and other events, our business, results of operations and financial condition could be adversely affected. If we acquire product candidates, we will also need to make certain assumptions about, among other things, development costs, the likelihood of receiving regulatory approval and the market for such product candidates. Our assumptions may prove to be incorrect, which could cause us to fail to realize the anticipated benefits of these transactions.

In addition, we will likely experience significant charges to earnings in connection with our efforts, if any, to consummate acquisitions. For transactions that are ultimately not consummated, these charges may include fees and expenses for investment bankers, attorneys, accountants and other advisors in connection with our efforts. Even if our efforts are successful, we may incur, as part of a transaction, substantial charges for closure costs associated with elimination of duplicate

operations and facilities and acquired IPR&D charges. In either case, the incurrence of these charges could adversely affect our results of operations for particular quarterly or annual periods.

We have restated prior consolidated financial statements and we have previously identified material weaknesses in our internal control over financial reporting, which may lead to possible additional risks and uncertainties, including possible loss of investor confidence and/or additional material misstatements in our financial statements.

We have restated our consolidated financial statements as of and for the year ended December 31, 2015 (including the third quarter within that year) and for the first and second quarters of fiscal year 2016 in order to correct certain accounting errors. For a description of the material weaknesses in our internal control over financial reporting identified by management in connection with the Restatement and the result of management’s efforts to remediate those material weaknesses, see “Part II, Item 9A - Controls and Procedures.”

As a result of the Restatement, we have become subject to possible additional costs and risks, including (a) accounting and legal fees incurred in connection with the Restatement and (b) a possible loss of investor confidence. Further, we were subject to a shareholder lawsuit related to the Restatement. See "Item 3. Legal Proceedings."

As described in “Part II, Item 9A - Controls and Procedures,” management previoulsy identified control deficiencies that represent material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a result of the identified material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2016. See “Part II, Item 9A - Controls and Procedures.”

We developed and implemented a remediation plan to address the material weaknesses, which we concluded was successful as of December 31, 2017. However, if additional material weaknesses in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results, which could materially and adversely affect our business, results of operations and financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the material weakness, subject us to fines, penalties or judgments, harm our reputation or otherwise cause a decline in investor confidence.

Changes or modifications in financial accounting standards, including those related to revenue recognition, may harm our results of operations.

From time to time, the FASB either alone or jointly with other organizations, promulgates new accounting principles that could have an adverse impact on our results of operations. For example, in May 2014, FASB issued a new accounting standard for revenue recognition-Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, or ASC 606-that supersedes most current revenue recognition guidance. The new guidance requires a company to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. The new guidance becomes effective in fiscal 2018.

We anticipate this standard will have a material impact on our consolidated financial statements by accelerating the timing of revenue recognition for revenues related to royalties, and potentially certain contingent milestone based payments. Our practice has been to book royalties one quarter after our partners report sales of the underlying product. Now, under ASC 606, Ligand will estimate and book royalties in the same quarter that our partners report the sale of the underlying product. As a result, we will book royalties one quarter earlier compared to our past practice. We will rely on our partners’ earning releases and other information from our partners to determine the sales of our partners’ products and to estimate the related royalty revenues. If our partners report incorrect sales, or if our partners delay reporting of their earnings release, our royalty estimates may need to be revised and/or our financial reporting may be delayed.

Any difficulties in implementing this guidance could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us. Finally, if we were to change our critical accounting estimates, including those related to the recognition of license revenue and other revenue sources, our operating results could be significantly affected.

Uncertainties in the interpretation and application of the 2017 Tax Cuts and Jobs Act could materially affect our tax obligations and effective tax rate.

The 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted on December 22, 2017, and significantly affected U.S. tax law by changing how the U.S. imposes income tax on corporations, including by reducing the U.S. corporate income tax rate. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law and impact our results of operations in the period issued.

The Tax Act requires certain complex computations not previously provided in U.S. tax law. As such, the application of accounting guidance for such items is currently uncertain. Further, compliance with the Tax Act and the accounting for such provisions require accumulation of certain information not previously required or regularly produced. As a result, we have provided a provisional estimate on the effect of the Tax Act in our financial statements. As additional regulatory guidance is issued by the applicable taxing authorities, as accounting treatment is clarified, as we perform additional analysis on the application of the law, and as we refine estimates in calculating the effect, our final analysis, which will be recorded in the period completed, may be different from our current provisional amounts, which could materially affect our tax obligations and effective tax rate.

Our ability to use our net operating loss carryforwards and certain other tax attributes to offset future taxable income may be subject to certain limitations.

As of December 31, 2017 we had U.S. federal and state net operating loss carryforwards (NOLs) of approximately $388 million and $127 million, respectively, which expire through 2036, if not utilized. As of December 31, 2017, we had federal and California research and development tax credit carryforwards of approximately $24 million and $21 million, respectively. The federal research and development tax credit carryforwards expire in various years through 2036, if not utilized. The California research and development credit will carry forward indefinitely. Under Sections 382 and 383 of Internal Revenue Code of 1986, as amended (Code) if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research tax credits, to offset its future post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. We believe we have experienced certain ownership changes in the past and have reduced our deferred tax assets related to NOLs and research and development tax credit carryforwards accordingly. In the event that it is determined that we have in the past experienced additional ownership changes, or if we experience one or more ownership changes as a result future transactions in our stock, then we may be further limited in our ability to use our NOLs and other tax assets to reduce taxes owed on the net taxable income that we earn in the event that we attain profitability. Furthermore, under recently enacted U.S. tax legislation, although the treament of tax losses generated before December 31, 2017 has generally not changed, tax losses generated in calendar year 2018 and beyond may only offset 80% of our taxable income. This change may require us to pay federal income taxes in future years despite generating a loss for federal income tax purposes in prior years. Any such limitations on the ability to use our NOLs and other tax assets could adversely impact our business, financial condition and operating results.

We rely on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our business effectively.

Our business is increasingly dependent on critical, complex and interdependent information technology systems, including internet-based systems, to support business processes as well as internal and external communications. Despite the implementation of security measures, our internal computer systems and those of our partners are vulnerable to damage from cyber-attacks, computer viruses, security breaches, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. System failures, accidents or security breaches could cause interruptions in our operations, could lead to the loss of trade secrets or other intellectual property, could lead to the public exposure of personal information of our employees and others, and could result in a material disruption of our clinical and commercialization activities and business operations, in addition to possibly requiring substantial expenditures to remedy. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and our business and financial condition could be harmed.

The occurrence of a catastrophic disaster could damage our facilities beyond insurance limits or we could lose key data which could cause us to curtail or cease operations.

We are vulnerable to damage and/or loss of vital data from natural disasters, such as earthquakes, tornadoes, power loss, fire, floods and similar events, as well as from accidental loss or destruction. If any disaster were to occur, our ability to operate our business could be seriously impaired. We have property, liability, and business interruption insurance which may not be adequate to cover our losses resulting from disasters or other similar significant business interruptions, and we do not plan to purchase additional insurance to cover such losses due to the cost of obtaining such coverage. Any significant losses that are not recoverable under our insurance policies could seriously impair our business, financial condition and prospects.

We sold the 2019 Convertible Senior Notes, which may impact our financial results, result in the dilution of existing stockholders, create downward pressure on the price of our common stock, and restrict our ability to take advantage of future opportunities.

In August of 2014, we sold $245.0 million aggregate principal amount of 0.75% Convertible Senior Notes due 2019, or the 2019 Convertible Senior Notes. We will be required to pay interest on the 2019 Convertible Senior Notes until they come due or are converted, and the payment of that interest will reduce our net income. The sale of the 2019 Convertible Senior Notes may also affect our earnings per share figures, as accounting procedures require that we include in our calculation of earnings per share the number of shares of our common stock into which the 2019 Convertible Senior Notes are convertible. The 2019 Convertible Senior Notes may be converted, under the conditions and at the premium specified in the 2019 Convertible Senior Notes, into cash and shares of our common stock, if any (subject to our right to pay cash in lieu of all or a portion of such shares). If shares of our common stock are issued to the holders of the 2019 Convertible Senior Notes upon conversion, there will be dilution to our shareholders equity and the market price of our shares may decrease due to the additional selling pressure in the market. Any downward pressure on the price of our common stock caused by the sale or potential sale of shares issuable upon conversion of the 2019 Convertible Notes could also encourage short sales by third parties, creating additional selling pressure on our stock. Upon the occurrence of certain circumstances, holders of the 2019 Convertible Senior Notes may require us to purchase all or a portion of their notes for cash, which may require the use of a substantial amount of cash. If such cash is not available, we may be required to sell other assets or enter into alternate financing arrangements at terms that may or may not be desirable. The existence of the 2019 Convertible Senior Notes and the obligations that we incurred by issuing them may restrict our ability to take advantage of certain future opportunities, such as engaging in future debt or equity financing activities.

Impairment charges pertaining to goodwill, identifiable intangible assets or other long-lived assets from our mergers and acquisitions could have an adverse impact on our results of operations and the market value of our common stock.

The total purchase price pertaining to our acquisitions in recent years of CyDex, Metabasis, Pharmacopeia, Neurogen and OMT have been allocated to net tangible assets, identifiable intangible assets, in-process research and development and goodwill. To the extent the value of goodwill or identifiable intangible assets or other long-lived assets become impaired, we will be required to incur material charges relating to the impairment. Any impairment charges could have a material adverse impact on our results of operations and the market value of our common stock.

Our charter documents and concentration of ownership may hinder or prevent change of control transactions.

Provisions contained in our certificate of incorporation and bylaws may discourage transactions involving an actual or potential change in our ownership. In addition, our Board of Directors may issue shares of common or preferred stock without any further action by the stockholders. Our directors and certain of our institutional investors collectively beneficially own a significant portion of our outstanding common stock. Such provisions and issuances may have the effect of delaying or preventing a change in our ownership. If changes in our ownership are discouraged, delayed or prevented, it would be more difficult for our current Board of Directors to be removed and replaced, even if you or our other stockholders believe that such actions are in the best interests of us and our stockholders.

Our stock price has been volatile and could experience a sudden decline in value.

The market prices for securities of biotechnology and pharmaceutical companies have historically been highly volatile, and the market has recently experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Continued volatility in the overall capital markets could reduce the market price of our common stock in spite of our operating performance. Further, high stock price volatility could result in higher stock-based compensation expense.

Our common stock has experienced significant price and volume fluctuations and may continue to experience volatility in the future. Many factors may have a significant impact on the market price of our common stock, including, but not limited to, the following factors: results of or delays in our preclinical studies and clinical trials; the success of our collaboration agreements; publicity regarding actual or potential medical results relating to products under development by us or others; announcements of technological innovations or new commercial products by us or others; developments in patent or other proprietary rights by us or others; comments or opinions by securities analysts or major stockholders or changed securities analysts' reports or recommendations; future sales or shorting of our common stock by existing stockholders; regulatory developments or changes in regulatory guidance; litigation or threats of litigation; economic and other external factors or other disaster or crises; the departure of any of our officers, directors or key employees; period-to-period fluctuations in financial results; and price and volume fluctuations in the overall stock market.

Our results of operations and liquidity needs could be materially negatively affected by market fluctuations and economic downturn.

Our results of operations could be materially negatively affected by economic conditions generally, both in the United States and elsewhere around the world. Concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, and the U.S. financial markets have in the past contributed to, and may continue in the future contributed to, increased volatility and diminished expectations for the economy and the markets. Domestic and international equity markets periodically experience heightened volatility and turmoil. These events may have an adverse effect on us. In the event of a market downturn, our results of operations could be adversely affected by those factors in many ways, including making it more difficult for us to raise funds if necessary, and our stock price may further decline. We cannot provide assurance that our investments are not subject to adverse changes in market value. If our investments experience adverse changes in market value, we may have less capital to fund our operations.



Item 1B.	Unresolved Staff Comments

None.



Item 2.	Properties

We currently lease premises consisting of approximately 5,000 square feet of office space in San Diego which serves as our corporate headquarters. The lease expires in May 2023.

We lease approximately 1,500 square feet of laboratory space located at the Bioscience and Technology Business Center in Lawrence, Kansas, leased through December 2020.

We lease approximately 13,000 square feet of office and laboratory space located in Emeryville, California. The lease expires in August 2021.



Item 3.	Legal Proceedings

From time to time we are subject to various lawsuits and claims with respect to matters arising out of the normal course of our business. Due to the uncertainty of the ultimate outcome of these matters, the impact on future financial results is not subject to reasonable estimates.

In November 2016, a putative shareholder class action lawsuit was filed in the United States District Court for the Southern District of California against the Company, its chief executive officer and chief financial officer. The complaint was voluntarily dismissed without prejudice on May 15, 2017.

In November 2017, CyDex, our wholly owned subsidiary, received a paragraph IV certification from Teva Pharmaceuticals USA, Inc., Teva Pharmaceutical Industries Ltd. and Actavis, LLC (collectively “Teva”) alleging that certain of our patents related to Captisol were invalid, unenforceable and/or will not be infringed by Teva’s ANDA related to Spectrum

Pharmaceuticals’ NDA for Evomela. On December 20, 2017, CyDex filed a complaint against Teva in the U.S. District Court for the District of Delaware, asserting that Teva’s ANDA would infringe our patents.



Item 4.	Mine Safety Disclosures

Not applicable.

PART II



Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Market Information

Our common stock is traded on the Nasdaq Global Market under the symbol “LGND.”

The following table sets forth the high and low intraday sales prices for our common stock on the Nasdaq Global Market for the periods indicated:



	Price Range
	Low		High
Year Ended December 31, 2017:
1st Quarter	$	100.38	$	109.54
2nd Quarter	$	104.13	$	123.87
3rd Quarter	$	116.75	$	137.94
4th Quarter	$	128.36	$	147.04
Year Ended December 31, 2016:
1st Quarter	$	82.06	$	108.79
2nd Quarter	$	95.05	$	131.84
3rd Quarter	$	97.22	$	139.79
4th Quarter	$	87.50	$	110.83

As of February 15, 2018, the closing price of our common stock on the NASDAQ Global Market was $157.18

Holders

As of February 15, 2018, there were approximately 665 holders of record of the common stock.

Purchases of Equity Securities By the Issuer and Affiliated Purchasers

The following table presents information regarding repurchases by us of our common stock during the three months ended December 31, 2017 under the stock repurchase program approved by our board of directors in September 2015, under which we may acquire up to $200 million of our common stock in open market and negotiated purchases for a period of up to three years.

ISSUER PURCHASES OF EQUITY SECURITIES



	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands)
October 1 - October 31, 2017	—	$	—	—	$	195,610
November 1 - November 30, 2017	10,000	$	142.47	10,000	$	194,185
December 1 - December 31, 2017	4,000	$	135.32	4,000	$	193,644
Total	14,000	$	140.43	14,000	$	193,644

The graph below shows the five-year cumulative total stockholder return assuming the investment of $100 and is based on the returns of the component companies weighted monthly according to their market capitalizations. The graph compares total stockholder returns of our common stock, of all companies traded on the NASDAQ Stock market, as represented by the NASDAQ Composite^® Index, and of the NASDAQ Biotechnology Stock Index, as prepared by The NASDAQ Stock Market Inc.

The stockholder return shown on the graph below is not necessarily indicative of future performance and we will not make or endorse any predictions as to future stockholder returns.



	12/31/2013		12/31/2014		12/31/2015		12/31/2016		12/31/2017
Ligand	154	%	1	%	104	%	(6	)%	35	%
NASDAQ Market (U.S. Companies) Index	40	%	15	%	7	%	9	%	27	%
NASDAQ Biotechnology Stocks	66	%	34	%	12	%	(21	)%	22	%



Item 6.	Selected Consolidated Financial Data

The following selected historical consolidated financial and other data are qualified by reference to, and should be read in conjunction with, our consolidated financial statements and the related notes thereto appearing elsewhere herein and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our selected statement of operations data set forth below for each of the years ended December 31, 2017, 2016, 2015, 2014, and 2013 and the balance sheet data as of December 31, 2017, 2016, 2015, 2014 and 2013 are derived from our consolidated financial statements.



	Year Ended December 31,
	2017		2016			2015			2014			2013
Consolidated Statements of Operations Data:	(in thousands)
Royalties	$	88,685	$	59,423		$	38,194		$	29,994		$	23,584
Material sales	22,070		22,502			27,662			28,488			19,072
License fees, milestones, and other revenues	30,347		27,048			6,058			6,056			6,317
Total revenues	141,102		108,973			71,914			64,538			48,973
Cost of sales	5,366		5,571			5,807			9,136			3,357
Intangible Amortization	12,120		10,643			2,375			2,375			2,375
Research and development expenses	26,887		21,221			11,005			9,747			9,274
General and administrative expenses	28,653		27,653			25,398			23,654			18,544
Write-off of acquired IPR&D	—		—			—			—			480
Total operating costs and expenses	73,026		65,088			44,585			44,912			34,030
Income from operations	68,076		43,885			27,329			19,626			14,943
Income (loss) from continuing operations including noncontrolling interests	12,556		(2,367		)	227,444			10,892			8,832
Loss attributable to noncontrolling interests	—		—			(2,380		)	(1,132		)	—
Income (loss) from continuing operations	12,556		(2,367		)	229,824			12,024			8,832
Discontinued operations	—		731			—			—			2,588
Net income (loss)	12,556		(1,636		)	229,824			12,024			11,420
Basic per share amounts:
Income (loss) from continuing operations	$	0.60	$	(0.11	)	$	11.61		$	0.59		$	0.43
Discontinued operations	—		0.04			—			—			0.13
Net income (loss)	$	0.60	$	(0.08	)	$	11.61		$	0.59		$	0.56
Weighted average number of common shares-basic	21,032		20,831			19,790			20,419			20,312
Diluted per share amounts:
Income (loss) from continuing operations	$	0.53	$	(0.11	)	$	10.83		$	0.56		$	0.43
Discontinued operations	—		0.04			—			—			0.12
Net income (loss)	$	0.53	$	(0.08	)	$	10.83		$	0.56		$	0.55
Weighted average number of common shares-diluted	23,481		20,831			21,228			21,433			20,745



	December 31,
	2017			2016		2015			2014			2013
	(in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents, short-term investments, restricted cash and investments	$	208,099		149,393		$	229,947		$	168,597		$	17,320
Working capital (deficit)	(1,847		)	(64,076	)	(8,109		)	162,379			(4,058		)
Total assets	671,021			601,585		503,061			258,029			104,713
Long-term obligations (excludes long-term portions of deferred revenue, net and deferred gain)	9,981			3,603		3,330			208,757			24,076
Accumulated deficit	(400,924		)	(431,127	)	(429,491		)	(659,315		)	(671,339		)
Total stockholders’ equity	399,788			341,290		237,282			26,318			49,613



Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Revenue



(Dollars in thousands)	2017		2016		Change			% Change		2015		Change			% Change
Royalty Revenue	$	88,685	$	59,423	$	29,262		49	%	$	38,194	$	21,229		56	%
Material Sales	22,070		22,502		(432		)	(2	)%	27,662		(5,160		)	(19	)%
License fees, milestones and other revenue	30,347		27,048		3,299			12	%	6,058		20,990			346	%
Total revenue	$	141,102	$	108,973	$	32,129		29	%	$	71,914	$	37,059		52	%

Total revenue for 2017 increased $32.1 million or 29% compared with 2016 and for 2016 it increased $37.1 million or 52% compared with 2015.

Royalty revenue increased in each year presented primarily due to an increase in Promacta, Kyprolis and Evomela royalties. Increases in Promacta product sales of $197 million in 2017 and $151 million in 2016, and increases in the effective royalty rates due to our tiered royalty rate structure, drove the increase in Promacta royalty revenue. The effective royalty rate for Promacta was 8.0% in 2017, 7.3% in 2016 and 6.7% in 2015. Increases in Kyprolis product sales of $167 million in 2017 and $217 million in 2016 and increases in the effective royalty rates due to our tiered royalty rate structure, drove the increase in Kyprolis royalty revenue. The effective royalty rate for Kyprolis was 2.0% in 2017, 1.9% in 2016 and 1.7% in 2015. Evomela was launched in late 2016 and has a fixed royalty rate of 20%. Evomela royalties increased as a result of an increase in product sales of $29 million in 2017 and $7 million and in 2016.

Material sales decreased year over year in 2017 and 2016 due to timing of customer purchases of Captisol for use in clinical trials and in commercialized products. The increase in license fee, milestones and other revenues in 2017 compared to 2016 is primarily due to OmniAb license fees and milestone payments and the increase in 2016 compared to 2015 is primarily due to OmniAb license fees and a milestone payment received from Spectrum as a result of the FDA approval of Evomela.

The following table represents royalty revenue by program (in thousands):



	Year ended December 31,
	2017		2016		2015
Promacta / Revolade	$	62,918	$	43,043	$	29,295
Kyprolis	16,413		12,145		7,317
Third Largest Royalty	7,155		1,357		390
Other Royalties	2,199		2,878		1,192
Total	$	88,685	$	59,423	$	38,194

The following table represents material sales by clinical and commercial use (in thousands):



	Year ended December 31,
	2017		2016		2015
Clinical material sales	$	7,671	$	9,325	$	10,049
Commercial material sales	14,399		13,177		17,613
Total	$	22,070	$	22,502	$	27,662

Operating Costs and Expenses



(Dollars in thousands)	2017		2016		Change			% Change		2015		Change			% Change
Cost of sales	$	5,366	$	5,571	$	(205	)	(4	)%	$	5,807	$	(236	)	(4	)%
Amortization of intangibles	12,120		10,643		1,477			14	%	2,375		8,268			348	%
Research and development	26,887		21,221		5,666			27	%	11,005		10,216			93	%
General and administrative	28,653		27,653		1,000			4	%	25,398		2,255			9	%
Total operating costs and expenses	$	73,026	$	65,088	$	7,938		12	%	$	44,585	$	20,503		46	%

Total operating costs and expenses for 2017 increased $7.9 million or 12% compared with 2016. Cost of sales decreased year over year in 2017 and 2016 primarily due to lower material sales as a result of timing of customer purchases. Amortization of intangibles increased year over year in 2017 and 2016 due primarily to the acquisition of Crystal and OMT in October 2017 and January 2016, respectively. Research and development expenses and general and administrative expenses increased year over year in 2017 and 2016 due primarily to increased business development activities, timing of internal development costs and increased stock-based compensation expense and headcount related expenses associated with Crystal and OMT.

We do not provide forward-looking estimates of costs and time to complete our ongoing research and development projects as such estimates would involve a high degree of uncertainty. Uncertainties include our inability to predict the outcome of research and clinical studies, regulatory requirements placed upon us by regulatory authorities such as the FDA and EMA, our inability to predict the decisions of our partners, our ability to fund research and development programs, competition from other entities of which we may become aware in future periods, predictions of market potential for products that may be derived from our work, and our ability to recruit and retain personnel or third-party contractors with the necessary knowledge and skills to perform certain research. Refer to “Item 1A. Risk Factors” for additional discussion of the uncertainties surrounding our research and development initiatives.

Other (expense) income



(Dollars in thousands)	2017			2016			Change		% Change		2015			Change			% Change
Interest expense, net	$	(11,400	)	$	(12,178	)	$	778	(6	)%	$	(11,802	)	$	(376	)	3	%
Increase in contingent liabilities	(2,580		)	(3,334		)	754		(23	)%	(5,013		)	1,679			(33	)%
Gain on deconsolidation of Viking	—			—			—		—	%	28,190			(28,190		)	100	%
Loss from Viking	(2,048		)	(23,132		)	21,084		(91	)%	(5,143		)	(17,989		)	350	%
Other income, net	5,183			2,719			2,464		91	%	1,768			951			54	%
Total other (expense) income	$	(10,845	)	$	(35,925	)	$	25,080	(70	)%	$	8,000